Spearmint Oil Produced in the Far West; Revision of the Salable Quantity and Allotment Percentage for Class 3 (Native) Spearmint Oil for the 1996-97 Marketing Year

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[FV96-985-3 FIR]

Spearmint Oil Produced in the Far West; Revision of the Salable

Quantity and Allotment Percentage for Class 3 (Native) Spearmint Oil

for the 1996-97 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting as a

final rule, without change, an interim final rule increasing the

quantity of Class 3 (Native) spearmint oil produced in the Far West

that handlers may purchase from, or handle for, producers during the

1996-97 marketing year. This rule was recommended by the Spearmint Oil

Administrative Committee (Committee), the agency responsible for local

administration of the marketing order for spearmint oil produced in the

Far West. The Committee recommended this rule to avoid extreme

fluctuations in supplies and prices and thus help to maintain stability

in the Far West spearmint oil market.

EFFECTIVE DATE: June 11, 1997.

FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing

Field Office, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, 1220 SW Third Avenue, room 369,

Portland, Oregon 97204-2807; telephone: (503) 326-2043; Fax: (503) 326-

7440; or Caroline C. Thorpe, Marketing Order Administration Branch,

Fruit and Vegetable Division, AMS, USDA, room 2525, South Building,

P.O. Box 96456, Washington, DC 20090-6456; telephone: (202) 720-8139;

Fax: (202) 720-5698. Small businesses may request information on

compliance with this regulation by contacting: Jay Guerber, Marketing

Order Administration Branch, Fruit and Vegetable Division, AMS, USDA,

P.O. Box 96456, room 2525-S, Washington, DC 20090-6456; telephone (202)

720-2491; Fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order

No. 985 (7 CFR part 985), regulating the handling of spearmint oil

produced in the Far West (Washington, Idaho, Oregon, designated parts

of Nevada, and Utah), hereinafter referred to as the ``order.'' This

order is effective under the Agricultural Marketing Agreement Act of

1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the

``Act.''

[[Page 31705]]

The Department is issuing this rule in conformance with Executive

Order 12866.

This rule has been reviewed under Executive Order 12988, Civil

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

effect, salable quantities and allotment percentages may be established

for classes of spearmint oil produced in the Far West. This rule

continues an increase in the quantity of Native spearmint oil produced

in the Far West that may be purchased from or handled for producers by

handlers during the 1996-97 marketing year, which ended on May 31,

1997. 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) of the

Act, 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 request a modification of the order or to be exempted

therefrom. A 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 to review the Secretary's

ruling on the petition, provided an action is filed not later than 20

days after the date of the entry of the ruling.

The Far West spearmint oil industry is characterized by producers

whose farming operations generally involve more than one commodity and

whose income from farming operations is not exclusively dependent on

the production of spearmint oil. The U.S. production of spearmint oil

is concentrated in the Far West, primarily Washington, Idaho, and

Oregon (part of the area covered by the order). Spearmint oil is also

produced in the Midwest. The production area covered by the order

normally accounts for approximately 75 percent of the annual U.S.

production of spearmint oil.

This rule finalizes an interim final rule that increased the

quantity of Native spearmint oil that handlers may purchase from, or

handle for, producers during the 1996-97 marketing year, which ends on

May 31, 1997. Thus, this rule finalizes the increase in the salable

quantity from 1,074,902 pounds to 1,213,692 pounds and the allotment

percentage from 54 percent to 61 percent for Native spearmint oil for

the 1996-97 marketing year.

The salable quantity is the total quantity of each class of oil

that handlers may purchase from, or handle for, producers during a

marketing year. The salable quantity calculated by the Committee is

based on the estimated trade demand. The total salable quantity is

divided by the total industry allotment base to determine an allotment

percentage. Each producer is allotted a share of the salable quantity

by applying the allotment percentage to the producer's individual

allotment base for the applicable class of spearmint oil.

The initial salable quantity and allotment percentages for Scotch

and Native spearmint oils for the 1996-97 marketing year were

recommended by the Committee at its September 26, 1995, meeting. The

Committee recommended salable quantities of 989,303 pounds and

1,074,902 pounds, and allotment percentages of 55 percent and 54

percent, respectively, for Scotch and Native spearmint oils. A proposed

rule was published in the January 24, 1996, issue of the Federal

Register (61 FR 1855). Comments on the proposed rule were solicited

from interested persons until February 23, 1996. No comments were

received. Accordingly, based upon analysis of available information, a

final rule establishing the salable quantities and allotment

percentages for Scotch and Native spearmint oils for the 1996-97

marketing year was published in the March 20, 1996, issue of the

Federal Register (61 FR 11291).

Pursuant to authority contained in Secs. 985.50, 985.51, and 985.52

of the order, at its November 14, 1996, meeting, the Committee

unanimously recommended that the allotment percentage for Native

spearmint oil for the 1996-97 marketing year be increased by 7 percent

from 54 percent to 61 percent. This final rule increases the 1996-97

marketing year salable quantity of 1,074,902 pounds to 1,213,692

pounds.

However, some Native spearmint oil producers did not produce all of

their individual salable quantities for the 1996-97 marketing year, or

fill their deficiencies from the prior year's production. The marketing

order authorizes such producers to have their deficiencies filled by

other producers who have production in excess of their salable

quantities. This is optional for producers, but must be done before

November 1 of each marketing year.

The original total industry allotment base for Native spearmint oil

for 1996-97 was established at 1,990,559 pounds and was revised to

1,989,659 pounds to reflect loss of base due to non-production of

producer's total annual allotments. This adjustment resulted in a 900

pound loss of total industry base, which is reflected in the

calculations for the revised salable quantity.

This final rule finalizes the interim final rule that made an

additional amount of Native spearmint oil available by increasing the

salable quantity which releases oil from the reserve pool. Only

producers with Native spearmint oil in the reserve pool will be able to

use this increase in the salable quantity. Prior to November 1, 1996,

producers without reserve pool oil or producers with an insufficient

supply of reserve oil could have deficiencies in meeting their salable

quantities filled by producers having excess Native spearmint oil. If

all producers could use their salable quantity, this 7 percent increase

in the allotment percentage would have made an additional 135,276

pounds of Native spearmint oil available (1,989,659 x 7 percent).

However, Native spearmint oil producers having 25,546 pounds of Native

spearmint oil will not be able to use their reserve pool deficiencies

this marketing year. Deficiencies usually exist because of unplanned

problems that may reduce spearmint production. Thus, rather than

135,276 additional pounds being made available, this action continues

to make 113,730 additional pounds of Native spearmint oil available to

the market.

The following table summarizes the Committee recommendation:

Native Spearmint Oil Recommendation

(a) Actual Carry In on June 1, 1996: 45,632 pounds

(b) 1995-96 Salable Quantity: 1,074,902 pounds

(c) 1995-96 Available Supply: 1,120,534 pounds (a + b)

(d) Total Sales as of November 14, 1996: 1,036,058 pounds

(e) Calculated Available Supply as of November 14, 1996: 84,476 pounds

(c-d)

(f) Reserve Deficiency Affecting Salable Quantity: 25,546 pounds

(g) Revised Total Allotment Base: 1,989,659 pounds

(h) Recommended Allotment Percentage as of November 14, 1996: 61

percent

(i) Calculated Revised Salable Quantity: 1,213,692 pounds (g x h)

(j) Actual Oil Available as Salable Quantity: 1,188,146 pounds (i-f)

The Department, based on its analysis of available information, has

determined that an allotment percentage of 61 percent should be

established for Native spearmint oil for the 1996-97 marketing year.

This percentage will provide an

[[Page 31706]]

increased salable quantity of 1,213,692 and a new allotment percentage

from 54 percent to 61 percent for Native spearmint oil for the 1996-97

marketing year.

This rule relaxes the regulation of Native spearmint oil and will

allow growers to meet market needs and improved returns. In conjunction

with the issuance of this rule, the Department has reviewed the

Committee's revised marketing policy statement for the 1996-97

marketing year. The Committee's marketing policy statement has been

reviewed under the provisions as set forth in 7 CFR 985.50 and with

other USDA guidelines.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), AMS has considered the economic impact of this action on

small entities. Accordingly, AMS has prepared this final regulatory

flexibility analysis.

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 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 8 spearmint oil handlers subject to regulation under the

marketing order and approximately 250 producers of spearmint oil in the

regulated production area. Of the 250 producers, approximately 135

producers hold Class 1 (Scotch) oil allotment base, and approximately

115 producers hold Class 3 (Native) oil allotment base. Small

agricultural service firms are defined by the Small Business

Administration (SBA)(13 CFR 121.601) as those having annual receipts of

less than $5,000,000, and small agricultural producers have been

defined as those whose annual receipts are less than $500,000.

Based on the SBA's definition of small entities, it is estimated

that none of the eight handlers regulated by the order would be

considered small entities. All of the handlers are large corporations

involved in the international trading of essential oils and the

products of such essential oils. It is also estimated that 20 of the

135 Scotch spearmint oil producers and 10 of the 115 Native spearmint

oil producers would be classified as small entities under the SBA

definition. This is based on production information gathered from

assessments. Thus, a majority of handlers and producers of Far West

spearmint oil may not be classified as small entities.

The Far West spearmint oil industry is characterized by producers

whose farming operations generally involve more than one commodity, and

whose income from farming operations is not exclusively dependent on

the production of spearmint oil. Crop rotation is an essential cultural

practice in the production of spearmint for weed, insect, and disease

control. A normal spearmint producing operation would have enough

acreage for rotation such that the total acreage required to produce

the crop would be about one-third spearmint and two-thirds rotational

crops. An average spearmint producing farm would thus have to have

considerably more acreage than would be planted to spearmint during any

given season. To remain economically viable with the added costs

associated with spearmint production, most spearmint producing farms

would fall into the category of large businesses.

Small spearmint oil producers represent a minority of farming

operations and are more vulnerable to market fluctuations. Such small

farmers generally need to market their entire annual crop and do not

have the resources to cushion seasons with poor spearmint oil returns.

Conversely, large diversified producers have the potential to endure

one or more seasons of poor spearmint oil markets because of stronger

incomes from alternate crops which could support the operation for a

period of time. Despite the advantage of larger producers, increasing

the Native salable quantity and allotment percentage will help both

large and small producers by improving returns. In addition, this

change may potentially benefit the small producer more than large

producers. This is because the change ensures that small producers are

more likely to maintain a profitable cash flow and meet annual

expenses.

In making this latest recommendation, the Committee considered all

available information on supply and demand. The 1996-97 marketing year

began on June 1, 1996. As required under Sec. 985.50, the Committee

reviewed at a public meeting and submitted to the Department, a

marketing policy that included the following Native spearmint oil

information: estimated quantity; estimated demand; prospective

production; estimated total allotment base; quantity of reserve oil;

oil prices; market conditions; and whether the average price was

expected to exceed parity. Handlers have indicated that with this

action, the available supply of both Scotch and Native spearmint oils

appears adequate to meet anticipated demand through May 31, 1997.

Without the increase in Native spearmint oil, the Committee

believes the industry would not be able to meet market needs. As of

November 14, 1996, 84,476 pounds of Native spearmint oil was available

for market. Demand for Native spearmint oil from December 1 to May 31

over the past five years has ranged from a high of 245,661 pounds in

1991-92 to a low of 92,658 pounds in 1992-93. The five year average is

157,531 pounds. Therefore, given this past history the industry would

be unlikely to meet market demand without this change. When the

Committee made its initial recommendation for the establishment of the

Native spearmint oil salable quantity and allotment percentage for the

1996-97 marketing year, it had anticipated that the year would end with

an ample available supply. This revision adds 113,730 pounds of Native

spearmint oil to the amount available for market during the remainder

of the 1996-97 marketing year.

Alternatives to this rule included not to increase the available

supply of Native spearmint oil, which could potentially hurt small

producers. The Committee believes that the level recommended will meet

market needs.

Annual salable quantities and allotment percentages have been

issued for both classes of spearmint oil since the order's inception.

Reporting and recordkeeping requirements have remained the same for

each year of regulation. Accordingly, this action will not impose any

additional reporting or recordkeeping requirements on either small or

large spearmint oil producers and handlers. All reports and forms

associated with this program are reviewed periodically in order to

avoid unnecessary and duplicitous information collection by industry

and public sector agencies. The Department has not identified any

relevant Federal rules that duplicate, overlap, or conflict with this

rule.

Finally, the Committee's meeting was widely publicized throughout

the spearmint oil industry and all interested persons were invited to

attend and participate on all issues. Interested persons were also

invited to submit information on the regulatory and informational

impacts of this action on small businesses.

The interim final rule regarding this action was issued on January

3, 1997, and published in the Federal Register (62 FR 1246, January 9,

1997), with an effective date of January 9, 1997. That rule amended

Sec. 985.215 of the rules and regulations in effect under the order.

[[Page 31707]]

That rule provided a 30-day comment period which ended February 10,

1997. No comments were received.

After consideration of all relevant matter presented, including

that contained in the prior proposed, interim final, and final rules in

connection with the establishment of the salable quantities and

allotment percentages for Scotch and Native spearmint oils for the

1996-97 marketing year, the Committee's recommendation and other

available information, it is found that to revise Sec. 985.215 (61 FR

11291) to change the salable quantity and allotment percentage for

Native spearmint oil as effective in the interim final rule (62 FR

1246), as hereinafter set forth, will tend to effectuate the declared

policy of the Act.

It is further found that good cause exists for not postponing the

effective date of this rule until 30 days after publication in the

Federal Register (5 U.S.C. 553) because this rule applies to spearmint

produced during the 1996-97 marketing year, which ended May 31, 1997.

Further, handlers are aware of this rule, which was recommended at a

public meeting. Also, a 30-day comment period was provided in the

interim final rule and no comments were received.

List of Subjects in 7 CFR Part 985

Marketing agreements, Oils and fats, Reporting and recordkeeping

requirements, Spearmint oil.

PART 985--SPEARMINT OIL PRODUCED IN THE FAR WEST

Accordingly, the interim final rule amending 7 CFR part 985 which

was published at 61 FR 1246 on January 9, 1997, is adopted as a final

rule without change.

Dated: June 4, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-15253 Filed 6-10-97; 8:45 am]

BILLING CODE 3410-02-P