Expenses, Assessment Rate, and Indemnification Reserve for Marketing Agreement No. 146 Regulating the Quality of Domestically Produced Peanuts

DEPARTMENT OF AGRICULTURE

7 CFR Part 998

[Docket No. FV94-998-1IFR]

Expenses, Assessment Rate, and Indemnification Reserve for

Marketing Agreement No. 146 Regulating the Quality of Domestically

Produced Peanuts

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This interim final rule authorizes expenditures for

administration and indemnification, establishes an assessment rate, and

authorizes continuation of an indemnification reserve under Marketing

Agreement 146 (agreement) for the 1994-95 crop year. This rule also

increases the administrative assessment rate for the 1993-94 crop year.

Authorization of this budget enables the Peanut Administrative

Committee (Committee) to incur operating expenses, collect funds to pay

those expenses, and settle indemnification claims during the 1994-95

crop year. Authorization of the increase in the administrative

assessment rate for the 1993-94 crop year enables the Committee to

collect sufficient funds to pay expenses projected for the remainder of

that year. Funds to administer this program are derived from

assessments on handlers who have signed the agreement.

DATES: Section 998.407 is effective July 1, 1994, through June 30,

1995. Section 998.406 is effective July 1, 1993, through June 30, 1994.

Comments received by June 13, 1994, will be considered prior to

issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments

concerning this rule. Comments must be sent in triplicate to the Docket

Clerk, Fruit and Vegetable Division, AMS, USDA, PO Box 96456, room

2523-S, Washington, DC 20090-6456, FAX 202-720-5698. Comments should

reference the docket number and the date and page number of this issue

of the Federal Register and will be available for public inspection in

the Office of the Docket Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: Martha Sue Clark, Marketing Order

Administration Branch, Fruit and Vegetable Division, AMS, USDA, PO Box

96456, room 2523-S, Washington, DC 20090-6456, telephone 202-720-9918,

or William G. Pimental, Southeast Marketing Field Office, Fruit and

Vegetable Division, AMS, USDA, PO Box 2276, Winter Haven, FL 33883-

2276, telephone 813-299-4770.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing

Agreement 146 (7 CFR part 998) regulating the quality of domestically

produced peanuts. This agreement is effective under the Agricultural

Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674),

hereinafter referred to as the Act.

The Department is issuing this rule in conformance with Executive

Order 12866.

This interim final rule has been reviewed under Executive Order

12887, Civil Justice Reform. Under the agreement now in effect, peanut

handlers signatory to the agreement are subject to assessments. Funds

to administer the peanut agreement program are derived from such

assessments, and deductible type insurance for 1994-95 indemnification

expenses. This rule authorizes expenditures and establishes an

assessment rate for the Committee for the crop year beginning July 1,

1994, and increases the administrative assessment rate for the crop

year which began July 1, 1993. This rule will not preempt any State or

local laws, regulations, or policies, unless they present an

irreconcilable conflict with this rule. There are no administrative

procedures which must be exhausted prior to any judicial challenge to

the provisions of this rule.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), the Administrator of the Agricultural Marketing Service

(AMS) has considered the economic impact of this rule on small

entities.

The purpose of the RFA is to fit regulatory actions to the scale of

business subject to such actions in order that small businesses will

not be unduly or disproportionately burdened.

There are approximately 47,000 producers of peanuts in the 16

States covered under the agreement, and approximately 76 handlers

regulated under the agreement. Small agricultural producers have been

defined by the Small Business Administration (13 CFR 121.601) as those

having annual receipts of less than $500,000, and small agricultural

service firms are defined as those whose annual receipts are less than

$3,500,000. A majority of the producers may be classified as small

entities, and some of the handlers covered under the agreement are

small entities.

Under the agreement, the assessment rate for a particular crop year

applies to all assessable tonnage handled from the beginning of such

year (i.e., July 1). An annual budget of expenses is prepared by the

Committee and submitted to the Department for approval. The members of

the Committee are handlers and producers of peanuts. They are familiar

with the Committee's needs and with the costs for goods, services, and

personnel for program operations and, thus, are in a position to

formulate appropriate budgets. The budgets are formulated and discussed

at industry-wide meetings. Thus, all directly affected persons have an

opportunity to provide input in recommending the budget, assessment

rate, and indemnification reserve. The handlers of peanuts who are

directly affected have signed the marketing agreement authorizing the

expenses that may be incurred and the imposition of assessments.

The assessment rate recommended by the Committee for the 1994-95

crop year was derived by dividing anticipated expenses by expected

receipts and acquisitions of farmers' stock peanuts. It applies to all

assessable peanuts received or acquired by handlers from July 1, 1994.

Because that rate is applied to actual receipts and acquisitions, it

must be established at a rate which will produce sufficient income to

pay the Committee's expenses.

The Committee met on March 16, 1994, and unanimously recommended

1994-95 crop year administrative expenses of $1,056,000 and an

administrative assessment rate of $0.60 per net ton of assessable

farmers' stock peanuts received or acquired by handlers. In comparison,

1993-94 crop year budgeted administrative expenditures were $1,020,000,

and the administrative assessment rate was initially recommended and

fixed at $0.60 per ton.

Administrative budget items for 1994-95 which have increased

compared to those budgeted for 1993-94 (in parentheses) are: Executive

salaries, $140,146 ($134,304), clerical salaries, $132,500 ($127,479),

field representatives salaries, $290,420 ($278,778), field

representatives travel, $110,000 ($107,000), insurance and bonds,

$8,500 ($7,500), and furniture and equipment, $9,500 ($4,000). Items

which have decreased compared to those budgeted for 1993-94 (in

parentheses) are: Payroll taxes, $43,000 ($45,000), office rent and

parking, $50,000 ($52,500), postage and mailing, $12,000 ($13,000), and

audit fees, $9,200 ($9,500). All other items are budgeted at last

year's amounts. The administrative budget includes $14,234 for

contingencies ($4,439 last year).

The Committee also unanimously recommended 1994 crop

indemnification claims payments of up to $9,000,000 and an

indemnification assessment of $2.00 per net ton of farmers' stock

peanuts received or acquired by handlers to continue its

indemnification program. The 1993-94 crop year indemnification

assessment was $1.00 per net ton. Because of the high number of claims

being processed during the 1993-94 crop year, the Committee recommended

a higher assessment rate so that sufficient reserve funds will be

available. The $9,000,000 of indemnification claims coverage to be

provided on 1994 crop peanuts includes $5,000,000 in excess loss

insurance to be purchased by the Committee--the same as last year.

The cost of the indemnification insurance premium and the costs to

carry out indemnification procedures (sampling and testing of 2-AB and

3-AB Subsamples, and crushing supervision, of indemnified peanuts,

pursuant to Sec. 998.200 (c), are additional indemnification costs

which must be authorized and paid from available indemnification funds.

Such costs are not expected to exceed $2,000,000.

The total assessment rate is $2.60 per ton of assessable peanuts

($0.60 for administrative and $2.00 for indemnification). Assessments

are due on the 15th of the month following the month in which the

farmers' stock peanuts are received or acquired. Application of the

recommended rates to the estimated assessable tonnage of 1,760,000 will

yield $1,056,000 for program administration and $3,520,000 for

indemnification. The indemnification amount, when added to expected

cash carry over from 1993-94 indemnification operations of $12,609,100,

will provide $16,129,100, which should be adequate for the 1994 fund,

and to maintain an adequate reserve.

The 1993-94 budget was published in the Federal Register as an

interim final rule on June 11, 1993 (58 FR 32600), and finalized on

August 13, 1993 (58 FR 43066). The administrative expenses and

assessment rate for the 1993-94 crop year were based on an estimated

assessable tonnage of 1,700,000. Due to an unexpected short crop, the

assessable tonnage is estimated to be only 1,476,377. In order to have

sufficient revenue to cover budgeted expenses of $1,020,000, the

Committee unanimously recommended that the 1993-94 crop year

administrative assessment be increased from $0.60 to $0.70 per net ton

of assessable farmers' stock peanuts.

While this action will impose some additional costs on handlers,

the costs are in the form of uniform assessments on all handlers

signatory to the agreement. Some of the additional costs may be passed

on to producers. However, these costs will be significantly offset by

the benefits derived from the operation of the marketing agreement.

Therefore, the Administrator of the AMS has determined that this action

will not have a significant economic impact on a substantial number of

small entities.

After consideration of all relevant matter presented, including the

information and recommendations submitted by the Committee and other

available information, it is hereby found that this rule, as

hereinafter set forth, will tend to effectuate the declared policy of

the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good

cause that it is impracticable, unnecessary, and contrary to the public

interest to give preliminary notice prior to putting this rule into

effect and that good cause exists for not postponing the effective date

of this action until 30 days after publication in the Federal Register

because: (1) The Committee needs to have sufficient funds to pay its

expenses which are incurred on a continuous basis; (2) the 1993-94 crop

year began on July 1, 1993, and the 1994-95 crop year begins on July 1,

1994, and the marketing agreement requires that the rate of assessment

for the fiscal period apply to all assessable peanuts handled during

the fiscal period; (3) handlers are aware of these actions which were

unanimously recommended by the Committee at a public meeting and are

similar to other budget actions issued in past years; and (4) this

interim final rule provides a 30-day comment period, and all comments

timely received will be considered prior to finalization of this

action.

List of Subjects in 7 CFR Part 998

Marketing agreements, Peanuts, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR part 998 is

amended as follows:

PART 998--MARKETING AGREEMENT REGULATING THE QUALITY OF

DOMESTICALLY PRODUCED PEANUTS

1. The authority citation for 7 CFR part 998 continues to read as

follows:

Authority: 7 U.S.C. 601-674.

Note: These sections will not appear in the Annual Code of

Federal Regulations.

2. A new section Sec. 998.407 is added to read as follows:

Sec. 998.407 Expenses, assessment rate, and indemnification reserve.

(a) Administrative expenses. The budget of expenses for the Peanut

Administrative Committee for the crop year beginning July 1, 1994,

shall be in the amount of $1,056,000, such amount being reasonable and

likely to be incurred for the maintenance and functioning of the

Committee and for such purposes as the Secretary may, pursuant to the

provisions of the marketing agreement, determine to be appropriate.

(b) Indemnification expenses. Expenses of the Committee not to

exceed $9,000,000 for indemnification claims payments and claims

expenses, pursuant to the terms and conditions of indemnification

applicable to the 1994 crop effective July 1, 1994, are authorized. In

addition, indemnification expenses, in an undetermined amount estimated

not to exceed $2,000,000, which are incurred by the Committee for

excess loss insurance, sampling and testing fees for 2-AB and 3-AB

Subsamples, and fees for the supervision of the crushing of indemnified

peanuts are also authorized.

(c) Rate of assessment. Each handler shall pay to the Committee, in

accordance with Sec. 998.48 of the marketing agreement, an assessment

at the rate of $2.60 per net ton of farmers' stock peanuts received or

acquired other than from those described in Secs. 998.31(c) and (d). A

total of $0.60 shall be for administrative expenses and a total of

$2.00 shall be for indemnification. Assessments are due on the 15th of

the month following the month in which the farmers' stock peanuts are

received or acquired.

(d) Indemnification reserve. Monetary additions to the

indemnification reserve, established in the 1965 crop year pursuant to

Sec. 998.48 of the agreement, shall continue. That portion of the total

assessment funds accrued from the $2.00 rate not expended on

indemnification claims payments on 1994 crop peanuts and related

expenses shall be kept in such reserve and shall be available to pay

indemnification expenses on subsequent crops.

Sec. 998.406 [Amended]

3. In Sec. 998.406, paragraph (c) is amended by removing ``$1.60''

and adding in its place ``$1.70'' and by removing ``$0.60'' and adding

in its place ``$0.70.''

Dated: May 5, 1994.

Robert C. Keeney,

Deputy Director, Fruit and Vegetable Division.

[FR Doc. 94-11489 Filed 5-11-94; 8:45 am]

BILLING CODE 3410-02-P