To replace the existing Federal tobacco program with a federally chartered corporation to ensure the stability of the price and supply of domestically produced tobacco, to compensate quota holders for the loss of tobacco quota asset value, to provide transition assistance for active tobacco producers, to increase the competitiveness of domestically produced tobacco, and for other purposes.

To replace the existing Federal tobacco program with a federally chartered corporation to ensure the stability of the price and supply of domestically produced tobacco, to compensate quota holders for the loss of tobacco quota asset value, to provide transition assistance for active tobacco producers, to increase the competitiveness of domestically produced tobacco, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Tobacco Market Transition Act'.

(b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Definitions.

Sec. 3. Purposes.

TITLE I--TOBACCO COMMUNITY REVITALIZATION TRUST FUND

Sec. 101. Tobacco Community Revitalization Trust Fund.

TITLE II--TOBACCO MARKET TRANSITION ASSISTANCE

Sec. 201. Compensation to quota holders for loss of tobacco quota asset value.

Sec. 202. Transition payments for active tobacco producers.

Sec. 203. Tobacco loan associations.

Sec. 204. Transition payments for other persons involved in tobacco production and marketing.

Sec. 205. Tax treatment of compensation and transition payments.

TITLE III--ESTABLISHMENT OF PRIVATE TOBACCO PRODUCTION ADJUSTMENT AND QUALITY ASSURANCE PROGRAMS

Sec. 301. Establishment and duties of Tobacco Production Control Corporation.

Sec. 302. Board of directors of Corporation.

Sec. 303. Board meetings.

Sec. 304. Staff.

Sec. 305. General powers of Corporation.

Sec. 306. Corporation relationship with tobacco loan associations.

Sec. 307. Tobacco base price levels.

Sec. 308. Penalties.

Sec. 309. Program referenda.

TITLE IV--TERMINATION OF CURRENT TOBACCO PROGRAMS

Sec. 401. Termination of marketing quota programs and repeal of related provisions.

Sec. 402. Termination of tobacco price support loan and no net cost provisions and repeal of related provisions.

Sec. 403. Continued availability of Federal crop insurance.

SEC. 2. DEFINITIONS.

In this Act:

(1) ACTIVE TOBACCO PRODUCER- The term `active tobacco producer' means a person that--

(A) is the actual producer, as determined by the Secretary, of tobacco on a farm where tobacco is produced pursuant to a tobacco farm marketing quota or farm acreage allotment established under the Agricultural Adjustment Act of 1938 (7 U.S.C. 1281 et seq.) for the 2002 or 2003 crop year; and

(B) planted the crop, or is considered to have planted the crop under that Act, in 2001, 2002, or 2003.

(2) ASSOCIATION- The term `Association' means a producer-owned cooperative marketing association.

(3) CORPORATION- The term `Corporation' means the Tobacco Production Control Corporation established by section 301.

(4) QUOTA HOLDER- The term `quota holder' means an owner, as of January 1, 2003, of a tobacco farm marketing quota or a farm acreage allotment established under the Agricultural Adjustment Act of 1938 (7 U.S.C. 1281 et seq.) for the 2002 marketing year.

(5) SECRETARY- The term `Secretary' means the Secretary of Agriculture.

(6) TRUST FUND- The term `Trust Fund' means the Tobacco Community Revitalization Trust Fund established by section 101.

SEC. 3. PURPOSES.

It is the purpose of this Act--

(1) to terminate the existing Federal tobacco program and establish federally chartered corporation to ensure the stability of the price and supply of domestically produced tobacco;

(2) to compensate quota holders for the loss of tobacco quota asset value as a result of the termination of the existing Federal tobacco program;

(3) to provide transition assistance to active tobacco producers; and

(4) to make domestically produced tobacco more competitive with tobacco produced in other countries by reducing the operating costs of tobacco producers through the elimination of expenses associated with buying or leasing tobacco quota.

SEC. 101. TOBACCO COMMUNITY REVITALIZATION TRUST FUND.

(a) IN GENERAL-

(1) ESTABLISHMENT- There is established in the Treasury of the United States a trust fund to be known as the `Tobacco Community Revitalization Trust Fund'.

(2) CONTENTS- The Trust Fund shall consist of such amounts as may be appropriated or credited to the Trust Fund, including funds held in a No Net Cost Tobacco Fund or No Net Cost Tobacco Account that are transferred to the Trust Fund under section 203(c).

(b) ADMINISTRATION- The Trust Fund shall be administered by the Tobacco Production Control Corporation.

(c) EXPENDITURES FROM TRUST FUND- Amounts in the Trust Fund shall be available for making expenditures to defray--

(1) the costs of providing compensation to quota holders for the loss of tobacco quota asset value under section 201;

(2) the costs of making transition payments to active tobacco producers under section 202;

(3) the costs of forgiving loans and transferring title to inventories of tobacco and funds to the Commodity Credit Corporation under section 203;

(4) the costs of making transition payments to other persons directly involved in tobacco production and marketing under section 204;

(5) the costs of carrying out the duties of the Corporation and the Associations, including assuring the quality and controlling the production and marketing of domestic tobacco and otherwise carrying out title III; and

(6) the costs to the Secretary and the Corporation of enforcing title III.

SEC. 201. COMPENSATION TO QUOTA HOLDERS FOR LOSS OF TOBACCO QUOTA ASSET VALUE.

(a) PAYMENT AUTHORITY- Using amounts in the Trust Fund, the Corporation shall make payments for tobacco quota to eligible quota holders.

(b) ELIGIBILITY- To be eligible to receive payments under this section, a quota holder shall prepare and submit to the Corporation an application at such time, in such manner, and containing such information as the Corporation may require, including information sufficient to demonstrate to the satisfaction of the Corporation that the person was a quota holder on January 1, 2003.

(c) BASE QUOTA LEVEL-

(1) IN GENERAL- For each eligible quota holder that submits an application under subsection (b), the Secretary shall determine and provide to the Corporation the base quota level of the quota holder.

(2) LEVEL- For each kind of tobacco for which the marketing quota is expressed in pounds, the base quota level for a quota holder shall be equal to, at the election of the quota holder--

(A) the tobacco farm marketing quota established under the Agriculture Adjustment Act of 1938 for the 2002 marketing year for quota tobacco on the farm owned by the quota holder; or

(B) the average of the tobacco farm marketing quota established under the Agriculture Adjustment Act of 1938 for the 1997, 1998, and 1999 marketing years for quota tobacco on the farm owned by the quota holder.

(3) MARKETING QUOTAS OTHER THAN POUNDAGE QUOTAS- For each kind of tobacco for which there is a marketing quota or allotment (on an acreage basis), the base quota level for each eligible quota holder shall be determined in accordance with this subsection (based on a poundage conversion) in an amount equal to the product obtained by multiplying--

(A) the tobacco farm marketing quota or allotment established under the Agriculture Adjustment Act of 1938 for the 2002 marketing year (or, at the election of the quota holder, the average of the tobacco farm marketing quota or allotment established under such for the 1997, 1998, and 1999 marketing years, for the quota holder's farm; by

(B) the average yield per acre for the quota holder's farm for the kind of tobacco for that marketing year or those marketing years, whichever applies.

(d) PAYMENT AMOUNT- The Corporation shall make payments to each eligible quota holder in a total amount equal to the product obtained by multiplying--

(1) $8 per pound; by

(2) the base quota level established for the quota holder under subsection (c).

(e) TIME FOR PAYMENT- The amount determined under subsection (d) for a quota holder shall be paid in five equal installments during each of the 2003 through 2007 crops of tobacco.

SEC. 202. TRANSITION PAYMENTS FOR ACTIVE TOBACCO PRODUCERS.

(a) PAYMENT AUTHORITY- Using amounts in the Trust Fund, the Corporation shall make transition payments to eligible active tobacco producers.

(b) ELIGIBILITY- To be eligible to receive payments under this section, an active tobacco producer shall prepare and submit to the Corporation an application at such time, in such manner, and containing such information as the Corporation may require, including information sufficient to demonstrate to the satisfaction of the Corporation that, the person planted, or is considered to have planted, a 2001, 2002, or 2003 crop of tobacco.

(c) PAYMENT QUANTITY-

(1) IN GENERAL- For each eligible active tobacco producer that submits an application under subsection (b), the Secretary shall determine and provide to the Corporation, the production quantity of the producer eligible for payments under this section.

(2) ELIGIBLE PRODUCTION QUANTITY- The production quantity eligible for payment for an active tobacco producer shall be equal to, at the election of the active tobacco producer--

(A) the quantity, in pounds, of quota tobacco subject to the quota produced by the producer under the Agriculture Adjustment Act of 1938 for the 2002 marketing year; or

(B) the average quantity, in pounds, of quota tobacco subject to the quota produced by the producer under the Agriculture Adjustment Act of 1938 for the 1997, 1998, and 1999 marketing years.

(3) MARKETING QUOTAS OTHER THAN POUNDAGE QUOTAS- For each kind of tobacco for which there is a marketing quota or allotment on an acreage basis, the production quantity eligible for payment for each active tobacco producer shall be equal to, at the election of the active tobacco producer--

(A) the actual pounds marketed for the 2002 crop year; or

(B) the average of the actual pounds marketed for the 1997, 1998, and 1999 crop years.

(d) PAYMENT AMOUNT- The Corporation shall make payments to each active tobacco producer in a total amount equal to the product obtained by multiplying--

(1) $4 per pound; by

(2) the production base established for the active producer under subsection (c).

(e) TIME FOR PAYMENT- The amount determined under subsection (d) for an active tobacco producer shall

(f) DEATH OF ACTIVE TOBACCO PRODUCER- If an active tobacco producer who is entitled to payments under this section dies and is survived by a spouse or one or more dependents, the right to receive the payments shall transfer to the surviving spouse or, if there is no surviving spouse, to the estate of the producer.

SEC. 203. TOBACCO LOAN ASSOCIATIONS.

(a) PRIOR LOANS- The Secretary shall forgive each loan made to an Association under section 106A or 106B of the Agricultural Act of 1949 (7 U.S.C. 1445 1, 1445 2) that is outstanding on the date of enactment of this Act.

(b) TRANSFER OF TITLE FOR LOAN INVENTORIES- The Secretary shall transfer to the Commodity Credit Corporation the title to all inventories of tobacco held by the Secretary to secure loans made to the Association under section 106A or 106B of the Agricultural Act of 1949 (7 U.S.C. 1445 1, 1445 2).

(c) NO NET COST TOBACCO FUNDS- Notwithstanding sections 106A(f) and 106B(g) of the Agricultural Act of 1949 (7 U.S.C. 1445-1(f) and 1445-2(g)), all funds held in a No Net Cost Tobacco Fund or No Net Cost Tobacco Account on behalf of an Association under section 106A or 106B of that Act (7 U.S.C. 1445-1, 1445-2) on the day before the date of enactment of this Act shall be transferred to the Trust Fund.

SEC. 204. TRANSITION PAYMENTS FOR OTHER PERSONS INVOLVED IN TOBACCO PRODUCTION AND MARKETING.

(a) PAYMENTS FOR OTHER PERSONS- The Corporation shall consider the feasibility of making transition payments to tobacco graders, inspectors, checkers, auctioneers, equipment dealers, warehousemen, and other persons who are adversely and directly affected by the termination of the Federal tobacco program.

(b) RULES- Payment amounts under this section shall be established by and made according to the rules issued by the Corporation.

SEC. 205. TAX TREATMENT OF COMPENSATION AND TRANSITION PAYMENTS.

(a) IN GENERAL- Part II of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically included in gross income) is amended by adding at the end the following new section:

`SEC. 91. TOBACCO QUOTA HOLDER COMPENSATION AND TRANSITION PAYMENTS.

`(a) COMPENSATION TO QUOTA HOLDERS FOR LOSS OF TOBACCO QUOTA ASSET VALUE- Any amount received under section 201 of the Tobacco Market Transition Act shall be treated as gain from the sale of a capital asset held for more than 1 year.

`(b) TRANSITION PAYMENTS FOR ACTIVE TOBACCO PRODUCERS- Any amount received under section 202 of such Act shall be included in gross income as ordinary income.'

(b) CLERICAL AMENDMENT- The table of sections for part II of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item:

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2002.

SEC. 301. ESTABLISHMENT AND DUTIES OF TOBACCO PRODUCTION CONTROL CORPORATION.

(a) ESTABLISHMENT- There is established a corporation to be known as the `Tobacco Production Control Corporation', which shall be a federally chartered instrumentality of the United States.

(b) DUTIES-

(1) IN GENERAL- Effective for the 2003 and each subsequent crop of each kind of tobacco, the Corporation shall be responsible for the promulgation of rules governing the production, marketing, importation, exportation, and consumer quality assurances for each kind of tobacco.

(2) MAJORITY VOTE REQUIRED- The promulgation of rules under this section and other decisions of the Corporation under this section shall require at least a majority vote of the Board of Directors of the Corporation.

(c) PRODUCTION AND MARKETING LICENSES-

(1) IN GENERAL- The Corporation shall establish a licensing system that provides for the orderly production and marketing of tobacco in the United States. The Corporation shall issue marketing licenses to tobacco marketing facilities and tobacco purchasing entities.

(2) INITIAL LICENSE- The Corporation shall issue a license to each active tobacco producer, or other person that meets requirements established by the Corporation, initially based upon the eligible production quantity determined for each active tobacco producer under section 202(c).

(3) SUBSEQUENT CROP YEARS- The Corporation shall establish the amount that each licensee may market for each subsequent year based on the production level recommended by the Secretary for that year, which shall be based on the information collected under section 320A of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314g), and the licensee's production quantity for the preceding year.

(4) SURRENDER- The licensee shall surrender the license to the Corporation if the licensee fails to actively engage in the production of tobacco.

(5) PROHIBITIONS-

(A) MARKETING WITHOUT LICENSE- The sale or marketing of a type of tobacco which prior to the date of enactment of this Act was produced pursuant to a tobacco farm marketing quota or farm acreage allotment issued under the Agricultural Act of 1938 is prohibited without a license.

(B) TRANSFER OF LICENSE- The sale, lease, or other transfer of a license shall be prohibited except pursuant to subsection (h).

(d) COMPLIANCE- The Corporation shall ensure compliance, through whatever means is available, of all

(e) QUALITY ASSURANCE- The Corporation shall establish a system that will provide assurance to consumers of the quality of all tobacco marketed in the United States and that, at a minimum--

(1) provides for the inspection and grading of domestically produced tobacco and imported tobacco;

(2) determines and describes the physical characteristics of domestically produced tobacco and imported tobacco; and

(3) ensures the physical and chemical integrity of domestically produced tobacco and imported tobacco;

(f) METHODS TO CARRY OUT DUTIES- To carry out its duties, functions, and determinations, the Corporation shall utilize Associations and local committees to the extent practicable and appropriate.

(g) TRANSITION- The Corporation shall continue to maintain and carry out a tobacco program in accordance with the rules and regulations contained in chapter 7 of the Code of Federal Regulations unless and until the Corporation promulgates rules under subsection (b).

(h) TRANSFER OF LICENSE-

(1) RIGHT OF SURVIVORSHIP- In the case of the death of a person to whom a license has been issued under this section, the license shall transfer to the surviving spouse of the person or, if there is no surviving spouse, to surviving direct descendants of the person.

(2) HARDSHIP- In the case of the death of a person to whom a license has been issued under this section and whose descendants are temporarily unable to produce a crop of tobacco, the Corporation may hold the license in the name of the descendants for a period of not more than 18 months, at the discretion of the Corporation.

(3) LIFETIME TRANSFER- A person that is eligible to obtain a license under this section may at any time transfer all or part of the license to the person's spouse or direct descendants that are actively engaged in the production of tobacco.

SEC. 302. BOARD OF DIRECTORS OF CORPORATION.

(a) IN GENERAL- The powers of the Corporation shall be vested in a Board of Directors.

(b) MEMBERS- The Board of Directors shall consist of 25 members as follows:

(1) The Secretary of Agriculture.

(2) The Secretary of Agriculture shall appoint--

(A) two members from each State that produces more than 250,000,000 pounds of tobacco;

(B) one member from each State that produces more than 50,000,000 pounds, but less than 250,000,000 pounds, of tobacco; and

(C) one member, to be appointed on a rotating basis, from a State that produces less than 50,000,000 pounds of tobacco.

(3) Three members appointed by Flue-cured tobacco associations and two members appointed by Burley tobacco associations.

(4) One member appointed by tobacco associations other than those specified in paragraph (3), on a rotating basis.

(5) The Secretary of Health and Human Services shall appoint three members representing public health interests.

(6) The Secretary of Agriculture shall appoint four members representing domestic tobacco product manufacturers, except that--

(A) no manufacturer may have more than one member on the Board;

(B) at least one of the members must be from a domestic smokeless tobacco manufacturer; and

(C) one of the members must be from a domestic cigarette manufacturer that comprises less than 5 percent of domestic cigarette sales, or a cigar manufacturer, or a pipe tobacco manufacturer, on a rotating basis.

(7) The Secretary of Agriculture shall appoint one member representing domestic export leaf dealers.

(8) The Secretary of Agriculture shall appoint one member that is the person responsible for operating the quality assurance system of the Corporation described in section 301(e).

(c) MEMBERSHIP QUALIFICATIONS- A member of the Board shall not hold any Federal, State, or local elected office. The members appointed under paragraphs (2), (3), and (4) of subsection (b) must be licensees under section 301.

(d) CHAIRPERSONS- The Secretary of Agriculture shall serve as chairperson of the Board.

(e) TERM; VACANCIES-

(1) TERM- The term of office of a member of the Board appointed under any of paragraphs (2) through (8) of subsection (b) shall be four years.

(2) VACANCIES- A vacancy on the Board shall be filled in the same manner as the original appointment was made.

(f) COMPENSATION-

(1) FEDERAL MEMBERS- A member of the Board who is an officer or employee of the United States shall not receive any additional compensation by reason of service on the Board.

(2) NON-FEDERAL MEMBERS- Any other member shall receive compensation, for each day (including travel time) that the member is engaged in the performance of the functions of the Board, at a rate determined appropriate by the Board.

(3) EXPENSES- A member of the Board shall be reimbursed for travel, subsistence, and other necessary expenses incurred by the member in the performance of the duties of the member.

(4) REPRESENTATION- No member of the Board shall receive compensation from more than one interest represented on the Board.

(g) CONFLICT OF INTEREST-

(1) CONFLICT OF INTEREST- Except as provided in paragraph (3), a member of the Board shall not vote on any matter concerning any application, contract, or claim, or other particular matter pending before the Corporation, in which, to the knowledge of the member, the member, spouse, or child of the member, partner of the member, or organization in which the member is serving as officer, director, trustee, partner, or employee, or any person or organization with which the member is negotiating or has any arrangement concerning prospective employment, has a financial interest.

(2) VIOLATIONS- Violation of paragraph (1) by a member of the Board shall be cause for removal of the member, but shall not impair or otherwise affect the validity of any otherwise lawful action by the Corporation in which the member participated.

(3) EXCEPTIONS- The prohibitions contained in paragraph (1) shall not apply to a member of the Board that is a tobacco producer if the member advises the Board of the nature of the particular matter in which the member proposes to participate, and if the member makes a full disclosure of the financial interest, prior to any participation.

(h) FINANCIAL DISCLOSURE- A Board member shall be subject to the financial disclosure requirements of subchapter B of chapter XVI of title 5, Code of Federal Regulations (or any corresponding or similar regulation or ruling), applicable to a special Government employee (as defined in section 202(a) of title 18, United States Code).

SEC. 303. BOARD MEETINGS.

(a) IN GENERAL- The Board shall meet at least three times each fiscal year at the call of a Chairperson or at the request of the Executive Director.

(b) LOCATION- The location of a meeting shall be subject to approval of the Executive Director.

(c) QUORUM- A quorum of the Board shall consist of a majority of the members.

SEC. 304. STAFF.

(a) EXECUTIVE DIRECTOR-

(1) APPOINTMENT- The Board shall appoint an Executive Director.

(2) DUTIES- The Executive Director shall be the chief executive officer of the Corporation, with such power and authority as may be conferred by the Board.

(3) COMPENSATION- The Executive Director shall receive basic pay at the rate provided for level IV of the Executive Schedule under section 5315 of title 5, United States Code.

(b) OFFICERS- The Board shall establish the offices and appoint the officers of the Corporation, including a Secretary, and define the duties of the officers in a manner consistent with this section.

(c) OTHER PERSONNEL- The Corporation may select and appoint officers, attorneys, employees, and agents, who shall be vested with such powers and duties as the Corporation may determine. The Corporation shall indemnify such personnel, as the Board considers necessary and desirable, except that an officer, attorney, or employee of the Corporation shall not be indemnified for an act outside the scope of employment.

(d) CONSULTANT AND INTERMITTENT SERVICES- The Corporation may obtain the services and fix the compensation of any consultant and otherwise procure temporary and intermittent services under section 3109(b) of title 5, United States Code.

(e) COMMITTEES- The Corporation may provide for and designate such committees, and the functions of the committees, as the Board considers necessary or desirable.

SEC. 305. GENERAL POWERS OF CORPORATION.

(a) BYLAWS- The Board shall adopt, and may from time to time amend, any bylaw that is necessary for the proper management and functioning of the Corporation and adopt and alter a corporate seal, which shall be judicially noticed.

(b) CORPORATION NAME- The Corporation shall have succession in its corporate name.

(c) AGREEMENT AND CONTRACT AUTHORITY- The Corporation may enter into any agreement or contract with a person or private or governmental agency.

(d) ACQUISITION AND DISPOSAL AUTHORITY- The Corporation may lease, purchase, accept a gift or donation of, or otherwise acquire, use, own, hold, improve, or otherwise deal in or with, and sell, convey, mortgage, pledge, lease, exchange, or otherwise dispose of, any property or interest in property, as the Corporation considers necessary in the transaction of the business of the Corporation. The Corporation may sell assets, loans, and equity interests acquired in connection with the financing of projects funded by the Corporation.

(e) LEGAL ACTIONS- The Corporation may sue and be sued in the corporate name of the Corporation and may independently retain legal representation, except that--

(1) no attachment, injunction, garnishment, or similar process shall be issued against the Corporation or property of the Corporation; and

(2) exclusive original jurisdiction shall reside in the district courts of the United States, and the Corporation may intervene in any court in any suit, action, or proceeding in which the Corporation has an interest.

(f) ASSISTANCE OF FEDERAL AGENCIES- The Corporation may, with the consent of any board, commission, independent establishment, or executive department of the Federal Government, including any field service, use information, services, facilities, officials, and employees in carrying out the duties of the Corporation, and pay for the use, which payments shall be transferred to the applicable appropriation account that incurred the expense.

(g) RIGHTS, PRIVILEGES, AND IMMUNITIES- The Corporation shall have the rights, privileges, and immunities of the United States with respect to the right to priority of payment with respect to debts due from bankrupt, insolvent, or deceased creditors.

(h) FINANCIAL AUTHORITIES- The Corporation may collect or compromise any obligations assigned to or held by the Corporation, including any legal or equitable rights accruing to the Corporation, and shall determine the character of, and necessity for, obligations and expenditures of the Corporation and the manner in which the obligations and expenditures shall be incurred, allowed, and paid, subject to provisions of law specifically applicable to Government corporations. The Corporation may make final and conclusive settlement and adjustment of any claim by or against the Corporation or a fiscal officer of the Corporation.

(i) OTHER POWERS- The Corporation may exercise all other lawful powers necessarily or reasonably related to the establishment of the Corporation to carry out this title and the powers, purposes, functions, duties, and authorized activities of the Corporation.

SEC. 306. CORPORATION RELATIONSHIP WITH TOBACCO LOAN ASSOCIATIONS.

The Corporation shall enter into an agreement with producer-owned cooperative marketing loan associations for each kind of tobacco--

(1) to make a base price available to producers of the kind of tobacco;

(2) arrange for financing and the administration of a base price for the kind of tobacco; and

(3) receive, process, store, and sell any domestically produced tobacco received as collateral for a base price loan.

SEC. 307. TOBACCO BASE PRICE LEVELS.

(a) DETERMINATION- The Corporation, in consultation with the Secretary and the Associations, shall determine, and revise as necessary, a base price for each kind of tobacco, which shall be based on the cost of producing that kind of tobacco.

(b) EFFECTIVE DATE- The base prices determined under subsection (a) shall take effect beginning with the 2004 tobacco crops.

SEC. 308. PENALTIES.

(a) IN GENERAL- The violation of any provision of this Act, or any rule or regulation issued to carry out this Act, or the terms of any license issued under this Act, by a person (including the marketing of any kind of tobacco without a license issued under this title or in excess of the quantity permitted under such a license) shall subject the person to revocation or suspension of the person's license, a penalty of 100 percent of the average market price (calculated to the nearest whole cent) for the kind of tobacco for the immediately preceding marketing year, or both, in the discretion of the Secretary.

(b) PAYER-

(1) IN GENERAL- Except as otherwise provided in this subsection, the penalty shall be paid by the person who acquired the tobacco from the producer.

(2) DEDUCTION FROM PRICE- An amount equivalent to the penalty may be deducted by the buyer from the price paid to the producer in any case in which the tobacco is marketed by sale.

(3) HANDLER- If the tobacco is marketed by the producer through a handler, the penalty shall be paid by the handler, which may deduct an amount equivalent to the penalty from the price paid to the producer.

(4) DIRECT MARKETING OUTSIDE UNITED STATES- In any case in which tobacco is marketed directly to any person outside the United States, the penalty shall be paid and remitted by the producer.

(c) FALSE STATEMENT OR OMISSION- If any producer falsely identifies or fails to account for the disposition of any tobacco--

(1) an amount of tobacco equal to the normal yield of the number of acres harvested in excess of the quantity permitted under a license issued under this title shall be considered to have been marketed in excess of the license for the farm; and

(2) the penalty for the excess marketing shall be paid and remitted by the producer.

(d) CARRYOVER- Tobacco carried over by the producer of the tobacco from 1 marketing year to another marketing year may be marketed without payment of the penalty imposed by this section if--

(1) the total quantity of tobacco available for marketing from the farm in the marketing year from which the tobacco is carried over does not exceed the quantity that may be marketed under a license issued for the farm for the marketing year; or

(2) the quantity of tobacco carried over does not exceed the normal production of that number of acres by which the harvested acreage of tobacco in the calendar year in which the marketing year begins is less than the quantity that may be marketed under the license.

(e) TOBACCO MARKETED PRIOR TO MARKETING YEAR- Tobacco produced in a calendar year for the marketing year beginning during the calendar year shall be subject to licenses issued for the marketing year even though the tobacco is marketed prior to the date on which the marketing year begins.

(f) PROPORTIONAL PAYMENTS- The Secretary shall require collection of the penalty on a proportion of each lot of tobacco marketed from the farm equal to the proportion that the tobacco available for marketing from the farm in excess of the quantity that may be marketed under a license is of the total quantity of tobacco available for marketing from the farm if satisfactory proof is not furnished as to the disposition to be made of the excess tobacco prior to the marketing of any tobacco from the farm.

(g) LIEN- Until the amount of the penalty provided by this section is paid, a lien on the tobacco with respect to which the penalty is incurred, and on any subsequent tobacco subject to licenses issued under this title in which the person liable for payment of the penalty has an interest, shall be in effect in favor of the Corporation for the amount of the penalty.

SEC. 309. PROGRAM REFERENDA.

(a) INITIAL REFERENDUM-

(1) REFERENDUM REQUIRED- After the end of the three-year period beginning on the date of enactment of this Act, if at least one-third of the licensees engaged in the production of a kind of tobacco request a referendum under this subsection, the Corporation shall conduct a referendum among the licensees engaged in the production of that kind of tobacco to determine whether the licensees are in favor of continuing the operation of the program established under this Act with respect to that kind of tobacco.

(2) PROCESS AND RESULTS- If more than one-half of the licensees voting in a referendum conducted under paragraph (1) with respect to a kind

(b) SUBSEQUENT REFERENDA- The Corporation may conduct subsequent referenda from time to time as the Corporation considers appropriate to determine whether producers are in favor of continuing the program established under this Act, the use of licenses, limitations on license transfer, or any other aspect of the program.

SEC. 401. TERMINATION OF MARKETING QUOTA PROGRAMS AND REPEAL OF RELATED PROVISIONS.

(a) TOBACCO CONTROL ACT- The Act of April 25, 1936 (commonly known as the Tobacco Control Act; 7 U.S.C. 515-515k), is repealed.

(b) COMMODITY HANDLING ORDERS- Section 8c(2) of the Agricultural Adjustment Act (7 U.S.C. 608c(2)), reenacted with amendments by the Agricultural Marketing Agreement Act of 1937, is amended by striking `tobacco,'.

(c) PROCESSING TAX- Section 9(b) of the Agricultural Adjustment Act (7 U.S.C. 609(b)), reenacted with amendments by the Agricultural Marketing Agreement Act of 1937, is amended--

(1) in paragraph (2), by striking `tobacco,'

(2) in paragraph (6)(B)(i), by striking `, or, in the case of tobacco, is less than the fair exchange value by not more than 10 per centum,'.

(d) BURLEY TOBACCO IMPORT REVIEW- Section 3 of Public Law 98-59 (7 U.S.C. 625) is repealed.

(e) DECLARATION OF POLICY- Section 2 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1282) is amended by striking `tobacco,'.

(f) DEFINITIONS- Section 301(b) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1301(b)) is amended--

(1) in paragraph (3)--

(A) by striking subparagraph (C); and

(B) by redesignating subparagraph (D) as subparagraph (C);

(2) in paragraph (6)(A), by striking `tobacco,';

(3) in paragraph (7), by striking the following:

`Tobacco (flue-cured), July 1-June 30;

Tobacco (other than flue-cured), October 1-September 30);'

(4) in paragraph (10)--

(A) by striking subparagraph (B); and

(B) by redesignating subparagraph (C) as subparagraph (B);

(5) in paragraph (11)(B), by striking `and tobacco';

(6) in paragraph (12), by striking `tobacco,';

(7) in paragraph (14)--

(A) by striking `(A)' in subparagraph (A); and

(B) by striking subparagraphs (B), (C), and (D);

(8) by striking paragraph (15);

(9) in paragraph (16)--

(A) by striking subparagraph (B); and

(B) by redesignating subparagraph (C) as subparagraph (B);

(10) by striking paragraph (17); and

(11) by redesignating paragraph (16) as paragraph (15).

(g) PARITY PAYMENTS- Section 303 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1303) is amended in the first sentence by striking `rice, or tobacco' and inserting `or rice'.

(h) MARKETING QUOTAS-

(1) REPEAL- Except for the section referred to in paragraph (2), part I of subtitle B of title III of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1311 et seq.) is repealed.

(2) SUBMISSION OF MANUFACTURER PURCHASE INTENTIONS- Section 320A of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314g) is not repealed, but subsection (a)(1) of such section is amended to read as follows:

`(1) Not later than December 1 of each marketing year with respect to Flue-cured tobacco, and January 15 of each marketing year with respect to Burley tobacco or other types of tobacco, each domestic manufacturer of cigarettes shall submit to the Secretary a statement, by kind, of the quantity of Flue-cured tobacco, Burley tobacco, and other types of tobacco that the manufacturer intends to purchase, directly or indirectly, on the United States auction markets or from producers during the next succeeding marketing year (in this section referred to as the `quantity of intended purchases').'.

(i) ADMINISTRATIVE PROVISIONS- Section 361 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1361) is amended by striking `tobacco,'.

(j) ADJUSTMENT OF QUOTAS- Section 371 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1371) is amended--

(1) in the first sentence of subsection (a) by striking `, rice, or tobacco' and inserting `or rice'; and

(2) in the first sentence of subsection (b), by striking `, rice, or tobacco' and inserting `or rice'.

(k) REPORTS AND RECORDS- Section 373 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1373) is amended--

(1) by striking `rice, or tobacco' each place it appears in subsections (a) and (b) and inserting `or rice'; and

(2) in subsection (a)--

(A) in the first sentence by striking `all persons engaged in the business of redrying, prizing, or stemming tobacco for producers,'; and

(B) in the last sentence by striking `$500' and all that follows through the period at the end of the sentence and inserting `$500.'.

(l) REGULATIONS- Section 375(a) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1375(a)) is amended by striking `peanuts, or tobacco' and inserting `or peanuts'.

(m) EMINENT DOMAIN- Section 378 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1378) is amended--

(1) in the first sentence of subsection (c) by striking `and tobacco'; and

(2) by striking subsections (d), (e), and (f).

(n) BURLEY TOBACCO FARM RECONSTITUTION- Section 379 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1379) is amended--

(1) in subsection (a)--

(A) by striking `(a)'; and

(B) in paragraph (6) by striking `, but this clause (6) shall not be applicable in the case of burley tobacco'; and

(2) by striking subsections (b) and (c).

(o) ACREAGE-POUNDAGE QUOTAS- Section 4 of the Act of April 16, 1955 (Public Law 89-12; 7 U.S.C. 1314c note), is repealed.

(p) BURLEY TOBACCO ACREAGE ALLOTMENTS- The Act of July 12, 1952 (7 U.S.C. 1315), is repealed.

(q) TRANSFER OF ALLOTMENTS- Section 703 of the Food and Agriculture Act of 1965 (7 U.S.C. 1316) is repealed.

(r) ADVANCE RECOURSE LOANS- Section 13(a)(2)(B) of the Food Security Improvements Act of 1986 (7 U.S.C. 1433c-1(a)(2)(B)) is amended by striking `tobacco and'.

(s) TOBACCO FIELD MEASUREMENT- Section 1112 of the Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203) is amended by striking subsection (c).

(t) LIABILITY- The amendments made by this section shall not affect the liability of any person under any provision of law in effect before the amendments take effect as provided under subsection (u).

(u) APPLICATION OF AMENDMENTS- The amendments made by this section shall apply with respect to the 2004 and subsequent tobacco crops.

SEC. 402. TERMINATION OF TOBACCO PRICE SUPPORT LOAN AND NO NET COST PROVISIONS AND REPEAL OF RELATED PROVISIONS.

(a) PARITY PRICE SUPPORT- Section 101 of the Agricultural Act of 1949 (7 U.S.C. 1441) is amended--

(1) in the first sentence of subsection (a), by striking `tobacco (except as otherwise provided herein), corn' and inserting `corn';

(2) by striking subsection (c);

(3) in subsection (d)(3)--

(A) by striking `, except tobacco,'; and

(B) by striking `and no price support shall be made available for any crop of tobacco for which marketing quotas have been disapproved by producers;'; and

(4) by redesignating subsections (d) and (e) as subsection (c) and (d), respectively.

(b) TERMINATION OF TOBACCO PRICE SUPPORT AND NO NET COST PROVISIONS- Sections 106, 106A, 106B, and 106C of the Agricultural Act of 1949 (7 U.S.C. 1445, 1445-1, 1445-2, 1445-3) are repealed.

(c) DEFINITION OF BASIC AGRICULTURAL COMMODITY- Section 408(c) of the Agricultural Act of 1949 (7 U.S.C. 1428(c)) is amended by striking `tobacco,'.

(d) REVIEW OF BURLEY TOBACCO IMPORTS- Section 3 of Public Law 98-59 (7 U.S.C. 625) is repealed.

(e) POWERS OF COMMODITY CREDIT CORPORATION- Section 5 of the Commodity Credit Corporation Charter Act (15 U.S.C. 714c) is amended by inserting `(other than tobacco)' after `agricultural commodities' each place it appears.

(f) TRANSITION PROVISIONS-

(1) PRICE SUPPORT LOAN OBLIGATIONS- The amendments made by this section shall not affect any person's obligations that arise under or with respect to the price support loan program or loans issued through such program under any provision of law in effect before the amendments take effect as provided under subsection (g).

(2) TOBACCO STOCKS AND LOANS- The Secretary of Agriculture shall issue regulations that require--

(A) the orderly disposition of quota tobacco held by any producer-owned cooperative marketing association that has entered into a loan agreement with the Commodity Credit Corporation to make price support available to producers of quota tobacco;

(B) the repayment of all tobacco price support loans or surrender of collateral by such associations not later than one year after this section becomes effective.

(3) SPECIAL RULES FOR TERMINATION OF NO NET COST FUNDS AND ACCOUNTS- Notwithstanding any other provision of law, upon the repeal by subsection (b) of the authorities in section 106A and 106B of the Agricultural Act of 1949 for the establishment of tobacco no net cost funds and accounts, respectively--

(A) any obligation of a tobacco producer, purchaser, or importer to make payments into any such fund or account also shall terminate; and

(B) any monies in any such fund or account shall be disposed of in the manner prescribed by the Secretary of Agriculture, except that--

(i) to the extent needed, such monies shall be applied or used for the purposes therefor prescribed by such sections; and

(ii) if any monies remain, the Secretary shall transfer such monies to the Secretary of Health and Human Services for use in accordance with section 402.

(g) APPLICATION OF AMENDMENTS- This section and the amendments made by this section shall apply with respect to the 2004 and subsequent tobacco crops.

SEC. 403. CONTINUED AVAILABILITY OF FEDERAL CROP INSURANCE.

Nothing in this title shall be construed to affect the eligibility of tobacco producers to obtain crop insurance for their crops pursuant to the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.) under the terms of such Act.