Almonds Grown in California; Reduction of Expenses and Assessment Rate

[[Page 26342]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV94-981-4 FR]

Almonds Grown in California; Reduction of Expenses and Assessment

Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule revises the expenses and assessment rate previously

established under Marketing Order No. 981 for the 1994-95 crop year.

This rule reduces the budget of expenses and rate which almond handlers

may be assessed for funding expenses by the Almond Board of California

(Board) that are reasonable and necessary to administer the program.

EFFECTIVE DATE: Effective July 1, 1994, through June 30, 1995.

FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing

Specialist, Marketing Order Administration Branch, Fruit and Vegetable

Division, AMS, USDA, P.O. Box 96456, room 2522-S, Washington, DC 20090-

6456, telephone 202-720-1509, or FAX (202) 720-5698; or Martin Engeler,

Assistant Officer-In-Charge, California Marketing Field Office, Fruit

and Vegetable Division, AMS, USDA, 2202 Monterey Street, suite 102B,

Fresno, California 93721, telephone 209-487-5901, or FAX (209) 487-

5906.

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing

Agreement and Order No. 981, both as amended (7 CFR part 981),

regulating the handling of almonds grown in California. The marketing

agreement and order are 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 of Agriculture (Department) is issuing this rule in

conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12778, Civil

Justice Reform. Under the provisions of the marketing order now in

effect, California almonds are subject to assessments. It is intended

that the assessment rate issued herein will be applicable to all

assessable almonds handled during the 1994-95 crop year, which began

July 1, 1994, and ends June 30, 1995. This rule will 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 608c(15)(A), any

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

stating that the order, any provision of the order, or any obligation

imposed in connection with the order is not in accordance with law and

requesting a modification of the order or to be exempted therefrom.

Such handler is afforded the opportunity for a hearing on the petition.

After the hearing the Secretary would rule on the petition. The Act

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

in which the handler is an inhabitant, or has his or her principal

place of business, has jurisdiction in equity to review the Secretary's

ruling on the petition, provided a bill in equity is filed not later

than 20 days after the date of the entry of the ruling.

Pursuant to the 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. Marketing orders issued

pursuant to the Act, and the rules issued thereunder, are unique in

that they are brought about through group action of essentially small

entities acting on their own behalf. Thus, both statutes have small

entity orientation and compatibility.

There are approximately 7,000 producers of California almonds under

this marketing order, and approximately 115 handlers. 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 $5,000,000. The majority of

California almond producers and handlers may be classified as small

entities.

A budget of expenses and rate of assessment for the 1994-95 crop

year was recommended on May 18, 1994, by the Board, the agency

responsible for local administration of the program. An interim final

rule was issued in the Federal Register on July 14, 1994, (59 FR 35847)

and a final rule was issued in the September 8, 1994 Federal Register

(59 FR 46321). Approved expenditures totalled $9,435,262 with an

approved assessment rate of 2.25 cents per pound. Of the 2.25 cents per

pound, handlers could receive credit-back against their assessment

obligation up to one cent per pound for their own promotional

expenditures. Specific explanations of various expenditure categories

and comparisons with a prior period are contained in the aforementioned

final rule.

The Board met on September 14, 1994, and recommended, by a seven to

two vote, postponing its paid advertising campaign and directly related

activities until further notice. It also voted to postpone assessment

billings pending evaluation of legal issues and future program

activities. Generic public relations activities and other promotion-

related activities to which the Board was contractually committed at

that time are to be continued. This action was taken as a result of

uncertainty created by legal decisions regarding the Board's former

advertising and promotion program.

Specifically, the Ninth Circuit Court of Appeals ruled in December

1993, that aspects of the Board's former advertising and promotion

program in the 1980's were unconstitutional. On remand, the district

court subsequently awarded plaintiff handlers refunds of assessments

and other money spent under the program. This decision was issued on

September 6, 1994, which led to the Board's actions to postpone

advertising activities at its September 14, 1994, meeting. The district

court's remand decision is currently being appealed. In addition,

several handlers filed legal challenges to the Board's current credit-

back advertising and promotion program, pursuant to section

608(c)(15)(A) of the Act.

The Board again met on November 30, 1994, and recommended, by a

seven to three vote, reducing the assessment rate by eliminating the

portion applicable to credit-back to handlers for their own promotional

activities (one cent), and by eliminating the portion of the remaining

assessment applicable to generic promotion activities. The resulting

assessment rate the Board recommended handlers pay was .47 cents per

pound. Concurrently, the Board again postponed assessment billings

pending further evaluation of the Board's financial status. These

actions were taken because of the apparent lack of support by some

handlers at the time for generic promotion and credit-back programs,

demonstrated by legal challenges filed by such handlers representing a

significant portion of the industry volume. One Board member commented

that since the handlers who have filed legal challenges are not likely

to pay the advertising assessment, it is not equitable for the

remainder of the [[Page 26343]] industry to shoulder the expense of an

advertising program.

The Board met again on February 1, 1995, and recommended, by a six

to four vote, to further reduce the assessment rate. The Board

recommended an assessment rate of .25 cents per pound. This action was

taken after the Board further evaluated its financial position and

current and future program activities.

An assessment rate of .25 cents per pound will generate income of

$1,675,000 based on an estimated assessable crop of 670 million pounds.

When combined with cash and cash equivalents held by the Board, this

will provide the Board with sufficient income to meet its

administrative expenses and those promotional expenses to which it is

contractually obligated for the remainder of the current fiscal year.

To reduce the budget of expenses previously approved ($9,435,262),

the Board deleted the funds budgeted for reserve replenishment

($300,000) and at its November 30, 1994, meeting, postponed a major

portion ($3.9 million) of the $4.7 million funds budgeted for

promotional activities. These revisions will reduce the budget to

$5,235,262. The reduced budget will provide the Board with sufficient

capital to carry into the next fiscal year to finance operations prior

to collection of future assessments.

Concerns were raised that the reduction of the assessment rate mid-

way through the crop year may generate complaints from those handlers

who relied on the final rule of September 8, 1994, which established an

assessment rate of 2.25 cents per pound, of which handlers could

receive credit-back up to one cent per pound for their own promotional

expenditures. Some handlers have incurred expenses that would be

eligible for credit-back under the provisions of that rule.

Under this assessment rate reduction, there is no assessment for

these handlers to claim credit-back against. However, an assessment

rate of .25 cents per pound is significantly lower than the previously

established rate of 2.25 cents. Under the previous assessment of 2.25

cents, if handlers claimed credit-back for the entire one cent, they

would still be required to pay 1.25 cents per pound to the Board.

Handlers will pay significantly less even if they conducted advertising

for which they believed credit-back would be obtained. In addition,

benefits are derived from advertising undertaken by these handlers.

A proposed rule concerning this rule was published in the March 24,

1995, Federal Register (60FR 15523), with a 30-day comment period. Two

comments were received.

The first comment received was from an independent handler who was

concerned that some handlers will make their final accountings to

growers prior to the finalization of the proposed rule. If handlers

make final payment to their growers based on the proposed assessment

and USDA modifies the proposal, the commenter states that some of these

handlers will file petitions against USDA for modifying the proposal

under section 608c(15)(A) of the Act. However, this final rule does not

modify the proposed rule and both handlers and growers had adequate

notice of this change. In addition, the marketing order does not

regulate contractual relationships between handlers and growers.

The second comment was received from the Office of Chief Counsel

for Advocacy of the United States Small Business Administration (SBA).

The SBA contended that although it concurs with the cancellation of the

advertising component of the order until legal disputes are resolved,

USDA's assertion that this cancellation of the advertising program

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

small entities was illogical. SBA contends that rational businesses are

not going to subject themselves to the increased paperwork generated by

the advertising program for insignificant economic gain and USDA

appears to be avoiding its responsibilities under the RFA.

Although SBA's comment seems to relate to the implementation of the

almond promotional program, rather than the elimination of that

program, consideration was given to the impact of this rule on large

and small handlers. As stated previously in this final rule and in the

proposed rule, concerns were raised about the handlers who have

incurred expenses that would be eligible for credit-back. It was

determined that handlers will pay significantly less even if they

conducted advertising for which they believed they would be entitled to

credit-back as well as derive benefits from the advertising they

conducted.

Another determination made in this rule and in the proposed rule

was that the action taken by the Board to minimize financial liability

in the event the pending litigation is decided unfavorably to the

Board, is sensible and reduces economic risk to handlers.

For the above reasons, USDA disagrees with the SBA's assertion that

this action fails to meet the requirements of the RFA. The program's

impact on small businesses has been properly addressed in this document

and in the proposed rule.

This rule reduces the assessment obligation imposed on handlers.

The assessments are uniform for all handlers. The assessment cost will

be offset by the benefits derived by the operation of the marketing

order. 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 the Board's recommendations and other

relevant information presented, it is found that this final rule will

tend to effectuate the declared policy of the Act.

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

cause exists for not postponing the effective date of this rule until

30 days after publication in the Federal Register because: (1) This

rule reduces the assessment rate currently in effect; (2) this rule

should be in effect as soon as possible because the 1994 crop year

began on July 1, 1994; and (3) the proposed rule provided a 30-day

comment period and the only comments received did not oppose the

reduction.

List of Subjects in 7 CFR Part 981

Almonds, Marketing agreements, Nuts, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR part 981 is

amended as follows:

PART 981--ALMONDS GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 981 continues to read as

follows:

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

Note: The following section will not appear in the Code of

Federal Regulations.

2. Section 981.341 is revised to read as follows:

Sec. 981.341 Expenses and assessment rate.

Expenses of $5,235,262 by the Almond Board of California are

authorized for the crop year ending June 30, 1995. An assessment rate

for the crop year payable by each handler in accordance with

Sec. 981.81 is fixed at .25 cents per kernel pound of almonds. Of the

.25 cents assessment rate, none is available for handler credit-back

pursuant to Sec. 981.441.

Dated: May 11, 1995.

Sharon Bomer Lauritsen,

Deputy Director, Fruit and Vegetable Division.

[FR Doc. 95-12145 Filed 5-16-95; 8:45 am]

BILLING CODE 3410-02-P