Almonds Grown in California; Reduction of Expenses and Assessment Rate

SUMMARY: This proposed rule invites comments on revising the expenses

and assessment rate previously established under Marketing Order No.

981 for the 1994-95 crop year. This proposal would reduce 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.

DATES: Comments received by April 24, 1995, will be considered prior to

issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments

concerning this action. Comments must be sent in triplicate to the

Docket Clerk, Fruit and Vegetable Division, AMS, USDA, P.O. 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: Kathleen M. Finn, Marketing

Specialist, Marketing Order Administration Branch, Fruit and Vegetable

Division, AMS, USDA, P.O. Box 96456, room 2536-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 proposed 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 proposed

rule in conformance with Executive Order 12866.

This proposed 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 as proposed 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 proposed 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 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 total $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 [[Page 15523]] 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 present 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 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.

If implemented and collected, 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 would 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 would reduce the budget to

$5,235,262. The reduced budget would 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.

If the assessment rate is reduced with no portion being creditable,

there will be no assessment for these handlers to claim credit-back

against. However, an assessment rate of .25 cents per pound is

significantly lower than the current rate of 2.25 cents. Under the

current established 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 would 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.

This action would reduce the assessment obligation imposed on

handlers. The assessments would be uniform for all handlers. The

assessment cost would be offset by the benefits derived by the

operation of the marketing order. Therefore, the Administrator of the

AMS has determined that this action would not have a significant

economic impact on a substantial number of small entities.

Interested persons are invited to submit their views and comments

on this proposal. Comments received within 30 days of publication of

this proposed rule in the Federal Register will be considered prior to

any final action being taken.

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

proposed to be 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.

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: March 21, 1995.

Sharon Bomer Lauritsen,

Deputy Director, Fruit and Vegetable Division.

[FR Doc. 95-7336 Filed 3-23-95; 8:45 am]

BILLING CODE 3410-02-W