Referendum on Amendment to Egg Research and Promotion Order To Increase the Rate of Assessment

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1250

[Docket No. PY-94-004]

Referendum on Amendment to Egg Research and Promotion Order To

Increase the Rate of Assessment

AGENCY: Agricultural Marketing Service, Agriculture.

ACTION: Proposed rule and notice of referendum.

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SUMMARY: This proposed rule would amend the Egg Research and Promotion

Order to increase the assessment rate from 5 cents to 10 cents per 30-

dozen case of commercial eggs. This proposal would also make a

conforming amendment to regulations. Notice also is hereby given that

the Agricultural Marketing Service will conduct a referendum to

determine whether egg producers favor an increase in the assessment

rate under the egg research and promotion program. Ballots and

instructions will be mailed directly to all known egg producers owning

over 75,000 laying hens.

DATES: The representative period for purposes of the referendum is May

1 through July 31, 1994. The referendum will be conducted between

September 26 and October 14, 1994.

FOR FURTHER INFORMATION CONTACT: Angela C. Clonts at 202-720-3506.

Supplementary Information:

Executive Orders 12866 and 12778

This rule is exempt from Executive Order 12866 review.

This proposed rule has been reviewed under Executive Order 12778,

Civil Justice Reform. It is not intended to have retroactive effect.

This rule would not preempt any State or local laws, regulations, or

policies, unless they present an irreconcilable conflict with this

rule.

The Act provides that administrative proceedings must be exhausted

before parties may file suit in court. Under section 14 of the Act, a

person subject to an order may file a petition with the Secretary

stating that such order, any provisions of such order or any

obligations imposed in connection with such order are not in accordance

with law; and requesting a modification of the order or an exemption

therefrom. Such person is afforded the opportunity for a hearing on the

petition. After a hearing, the Secretary would rule on the petition.

The Act provides that the district court of the United States in any

district in which such person is an inhabitant, or has his principal

place of business, has jurisdiction to review the Secretary's ruling on

the petition, if a complaint is filed within 20 days after date of the

entry of the ruling.

Effect on Small Entities

The Administrator of the Agricultural Marketing Service has

determined that this proposed rule will not have a significant economic

impact on a substantial number of small entities, as defined by the

Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

Currently, 618 egg producers pay assessments to the American Egg

Board (AEB). A proposed rule to increase the exemption level from

30,000 to 75,000 laying hens was published in the Federal Register on

March 22, 1994 (59 FR 13460). The increased exemption level would

exempt 253 small egg producers who represent 41 percent of the egg

producers currently paying assessments, but only 4 percent of AEB's

total assessment income. It is anticipated that the 75,000-hen

exemption level would be in place before the referendum on the

assessment rate increase. Therefore, a change in the assessment rate

would affect only egg producers owning more than 75,000 laying hens.

There are an estimated 365 producers who own more than 75,000 hens.

Currently, egg producers must pay a mandatory assessment of 5 cents per

30-dozen case of eggs marketed to fund the research and promotion

activities authorized by the Act. The present 5-cent assessment is

equivalent to approximately 0.231 percent of the wholesale price of a

1-dozen carton of Large eggs. An assessment rate of 10 cents per 30-

dozen case would be equivalent to approximately 0.463 percent of the

wholesale price of a 1-dozen carton of Large eggs. This is based on the

Economic Research Service's 3-year average wholesale price for New York

City Grade A Large cartoned eggs (1991-93) of 72 cents per dozen. AEB

collects approximately $7.5 million annually from the 5-cent

assessment, and it is estimated that it would collect $14 million for a

10-cent assessment. It is estimated that any additional costs would be

offset by the benefits to be derived from strengthened research and

promotion programs.

Paperwork Reduction

Information collection requirements and recordkeeping provisions

contained in 7 CFR Part 1250 have been previously approved by the

Office of Management and Budget and assigned OMB Control No. 0581-0093

under the Paperwork Reduction Act of 1980.

No additional recordkeeping requirements would be imposed as a

result of this proposed rule. It has been estimated that it will take

an average of about 30 minutes for each of the approximately 380 egg

producers to participate in the voluntary referendum balloting.

Background and Proposed Changes

The Egg Research and Consumer Information Act (7 U.S.C. 2701 et

seq.) was amended December 14, 1993 (Pub. Law 103-188. The amendments

raised the maximum rate of assessment paid by egg producers to the

American Egg Board (AEB) from 10 cents to 20 cents per 30-dozen case of

commercial eggs. The actual rate is prescribed by the Egg Research and

Promotion Order and is currently 5 cents per case. Any increase from

the 5 cents must be approved by producers voting in a referendum.

A proposed rule to increase the assessment rate in the Order from 5

cents to 10 cents per case was published in the Federal Register on

June 17, 1994 (59 FR 31174). Comments were solicited from interested

persons through August 16, 1994. Two comments were received; one from a

major egg producer organization in support and one from an egg producer

in opposition to the increase.

The commenter who opposed the increase cited the decline in number

of egg producers from 10,000 to 400 since AEB has been in existence and

that AEB programs have not halted the decline. However, the decrease in

the number of producers paying assessments is the result of several

factors. First, when AEB was first implemented in 1976, more than 6,000

producers owning over 3,000 laying hens were on record. By 1989, the

number had decreased to approximately 2,000 due to consolidations and

bankruptcies during a time when the economic situation was poor. In

1990, the exemption level was changed to 30,000 laying hens, decreasing

the number of producers by 36 percent. The exemption level was changed

again on August 1, 1994, to 75,000 hens, reducing the number to just

under 400 producers.

The commenter also expressed disapproval that a large percentage of

the proposed increase in funds might be used for advertising, resulting

in a temporary boost in demand and that such demand would be quickly

swallowed up by expanded production. The commenter also noted that AEB

has a function in the industry but must remain lean to ensure funds are

spent wisely. The commenter expressed concern that AEB not look for

budget expenditures to justify the increased assessment. AEB's

administrative costs have steadily remained at approximately 3 percent.

Further, as required by the 1993 amendments to the Act, AEB submitted

to the Department a marketing analysis showing the need for an

assessment increase.

The commenter was also opposed to the referendum voting rules. The

commenter indicated that the rules allow the number of hens owned to

give more weight to the vote, thereby granting larger producers more

voting power. The Act provides that a referendum vote will pass if

approved by not less than two-thirds of the producers voting or by a

majority of producers voting if they represent not less than two-thirds

of the commercial eggs produced.

The commenter further was of the view that the assessment rate

should remain at its current level of 5 cents, that producers should be

allowed to voluntarily give an extra 5 or 10 cents, and that refunds

should be available. The Act was amended in 1993 to provide that AEB

may recommend an increased assessment rate to the Secretary. In

accordance with the provisions of the Act, AEB has done so, and the

assessment increase as proposed herein will be subject to a referendum

vote.

It is directed that, in accordance with the procedures for the

conduct of referenda (7 CFR 1250.200 et seq.), a referendum will be

held beginning September 26, 1994, and ending on October 14, 1994, to

determine whether producers favor the increase to 10 cents per case as

proposed.

Section 9 of the Act requires approval by eligible egg producers

engaged in commercial egg production during the representative period

and at the time of voting. The representative period for the conduct of

the referendum is determined to be May 1, 1994, through July 31, 1994.

For the Order amendment to be approved, it must be favored by at

least two-thirds of the producers voting in this referendum or by a

majority of the producers voting if such majority represents not less

than two-thirds of the commercial eggs produced by those voting.

The agents of the Secretary to conduct the referendum are hereby

designated to be Janice L. Lockard and Angela C. Clonts, both of the

Poultry Division, Agricultural Marketing Service, USDA. The agents may

appoint subagents to assist them in performing their duties.

Ballots, instructions, eligibility requirements, and other

information pertinent to the referendum will be mailed to all known

eligible egg producers. In accordance with Public Law 103-188 and

recent amendments to the implementing Order (59 FR 38875), producers

owning 75,000 or fewer laying hens are exempt from paying assessments

under the Act and are therefore not eligible to vote in the referendum.

If any eligible voter does not receive a ballot by September 26,

the beginning date of the referendum period, such individual may obtain

a ballot from the Chief, Standardization Branch, Poultry Division, AMS,

USDA, Room 3944-South, P.O. Box 9456, Washington, D.C. 20090-6456.

Copies of the complete text of the Egg Research and Promotion Order, as

amended, may also be obtained from the Poultry Division.

List of Subjects in 7 CFR Part 1250

Administrative practice and procedure, Advertising, Agricultural

research, Eggs and egg products, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, Title 7, CFR Part 1250

is proposed to be amended as follows:

PART 1250--EGG RESEARCH AND PROMOTION

1. The authority citation of Part 1250 continues to read as

follows:

Authority: Pub. L. 93-428, 88 Stat. 1171, as amended, 7 U.S.C.

2701-2718.

2. Section 1250.347 is revised to read as follows:

Sec. 1250.347 Assessments.

Each handler designated in Sec. 1250.349 and pursuant to

regulations issued by the Board shall collect from each producer,

except for those producers specifically exempted in Sec. 1250.348, and

shall pay to the Board at such times and in such manner as prescribed

by regulations issued by the Board an assessment at a rate of not to

exceed 10 cents per 30-dozen case of eggs, or the equivalent thereof,

for such expenses and expenditures, including provisions for a

reasonable reserve and those administrative costs incurred by the

Department of Agriculture after this subpart is effective, as the

Secretary finds are reasonable and likely to be incurred by the Board

and the Secretary under this subpart, except that no more than one such

assessment shall be made on any case of eggs.

3. In section 1250.514, the first sentence is revised to read as

follows:

Sec. 1250.514 Levy of assessments.

An assessment rate of 10 cents per case of commercial eggs is

levied on each case of commercial eggs handled for the account of each

producer. * * *

Dated: September 8, 1994.

Lon Hatamiya,

Administrator.

[FR Doc. 94-22611 Filed 9-12-94; 8:45 am]

BILLING CODE 3410-02-P