Almonds Grown in California; Amended Assessment Rate

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV97-981-4 FR]

Almonds Grown in California; Amended Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule increases the assessment rate for the Almond

Board of California (Board) under Marketing Order No. 981 for the 1997-

98 and subsequent crop years. The Board is responsible for local

administration of the marketing order which regulates the handling of

almonds grown in California. Authorization to assess almond handlers

enables the Board to incur expenses that are reasonable and necessary

to administer the program.

EFFECTIVE DATE: August 1, 1997.

FOR FURTHER INFORMATION CONTACT: Martin Engeler, Assistant Regional

Manager, California Marketing Field Office, Fruit and Vegetable

Division, AMS, USDA, 2202 Monterey Street, Suite 102B, Fresno,

California 93721; Telephone: (209) 487-5901, Fax: (209) 487-5906; or

George Kelhart, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, Room 2525-S, P.O. Box 96456, Washington,

DC 20090-6456; Telephone: (202) 690-3919, 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, Room 2525-S, P.O. Box 96456,

Washington, DC 20090-6456; Telephone: (202) 720-2491, Fax: (202) 720-

5698.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order

No. 981, as amended (7 CFR part 981), regulating the handling of

almonds grown in California, hereinafter referred to as the ``order.''

The marketing 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.''

The Department of Agriculture (Department) is issuing this rule in

conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988,

Civil Justice Reform. Under the marketing order now in effect,

California almond handlers are subject to assessments. Funds to

administer the order are derived from such assessments. It is intended

that the assessment rate as issued herein will be applicable to all

assessable almonds beginning August 1, 1997, and continuing until

amended, suspended, or terminated. 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. 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 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.

[[Page 43460]]

This final rule increases the assessment rate established for the

Board for the 1997-98 and subsequent crop years from 1 cent to 2 cents

per pound of almonds received by handlers.

The almond marketing order provides authority for the Board, with

the approval of the Department, to formulate an annual budget of

expenses and collect assessments from handlers to administer the

program. The members of the Board are producers and handlers of

California almonds.

They are familiar with the Board's needs and with the costs for

goods and services in their local area and are thus in a position to

formulate an appropriate budget and assessment rate. The assessment

rate is formulated and discussed in a public meeting. Thus, all

directly affected persons have an opportunity to participate and

provide input.

The Board met on May 9, 1997, and recommended 1997-98 expenditures

of $11,333,876.49 and an assessment rate of 2 cents per pound of

almonds received by handlers. In comparison, last year's budgeted

expenditures were $6,426,500. The primary reason for the increase for

the upcoming crop year is the inclusion of funding for a generic paid

advertising program. The assessment rate is higher than last year's

established rate of 1 cent per pound; however, the Board also

recommended a credit-back program whereby handlers can receive credit

for their own promotional activities of up to 1 cent per pound against

their assessment obligation. Handlers not participating in this program

will remit the entire 2 cents to the Board. For administrative

purposes, the Board will separate the assessment into two portions when

billing handlers; an administrative portion of 1 cent per pound and an

advertising portion of 1 cent per pound. The Board's initial

recommendation indicated that implementation of the advertising portion

of the assessment and the generic advertising program may be impacted

by the outcome of litigation relative to advertising and promotion

conducted under marketing orders. The Board recommended not

implementing the advertising portion of the assessment until further

action of the Board is taken. At a meeting held on July 1, 1997, the

Board took action to implement the advertising portion of the

assessment, after it is established. The Board also confirmed its

intent to implement a generic paid advertising program.

The Board recommended that the major expenditures for the 1997-98

fiscal period should include $4,084,000 for information and research

programs, $3,408,000 for paid generic advertising, $881,534 for

salaries, $794,043 for international programs, $568,679 for production

research, $95,400 for crop estimates, and $90,000 for travel. Budgeted

expenses for major items in 1996-97 were $3,333,500 for information and

research, $731,534 for salaries, $660,500 for international programs,

$558,131 for production research, $91,160 for crop estimates, and

$97,470 for travel.

The assessment rate recommended by the Board was derived by

considering anticipated expenses and production levels of California

almonds, and additional pertinent factors. In its recommendation, the

Board utilized a production estimate of 681,600,000 pounds of edible

almonds for the year. If realized, this will provide revenue of

$6,816,000 from administrative assessments (681,600,000 pounds at 1

cent per pound). In addition, it is anticipated that $3,408,000 will be

derived from the portion of assessments eligible for credit-back but

received by the Board from handlers who do not obtain credit for their

own promotional activities. Estimates of marketable production of

almonds have been revised downward to 652,800,000 pounds since the

Board's recommendation, which would result in administrative

assessments of $6,528,000 and estimated credit-back revenue of

$3,264,000. However, if assessment revenues fall short of initial

projections due to a smaller crop, the Board maintains sufficient

financial reserves to compensate for any such shortage. Income derived

from handler assessments, along with interest income, Market Access

Program reimbursement for international promotion activities, research

conference revenue, miscellaneous income, and funds derived from the

Board's authorized monetary reserve will be adequate to cover budgeted

expenses. Any unexpended funds from the 1997-98 crop year may be

carried over to cover expenses during the first four months of the

1998-99 crop year.

The assessment rate established in this rule will continue in

effect indefinitely unless modified, suspended, or terminated by the

Secretary upon recommendation and information submitted by the Board or

other available information.

Although this assessment rate is effective for an indefinite

period, the Board will continue to meet prior to or during each fiscal

period to recommend a budget of expenses and consider recommendations

for modification of the assessment rate. The dates and times of Board

meetings are open to the public and interested persons may express

their views at these meetings. The Department will evaluate Board

recommendations and other available information to determine whether

modification of the assessment rate is needed. Further rulemaking will

be undertaken as necessary. The Board's 1997-98 budget and those for

subsequent crop years will be reviewed and, as appropriate, approved by

the Department.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), the Agricultural Marketing Service (AMS) has considered the

economic impact of this rule 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 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 97 handlers of California almonds who are

subject to regulation under the marketing order and approximately 7,000

almond producers in the regulated area. Small agricultural service

firms have been defined by the Small Business Administration (13 CFR

121.601) as those having annual receipts of less than $5,000,000, and

small agricultural producers are defined as those having annual

receipts of less than $500,000.

Currently, about 58 percent of the handlers ship under $5,000,000

worth of almonds and 42 percent ship over $5,000,000 worth of almonds

on an annual basis. In addition, based on acreage, production, and

grower prices reported by the National Agricultural Statistics Service,

and the total number of almond growers, the average annual grower

revenue is approximately $156,000. In view of the foregoing, it can be

concluded that the majority of handlers and producers of California

almonds may be classified as small entities.

This final rule will increase the assessment rate established for

the Board for the 1997-98 and subsequent crop years from 1 cent to 2

cents per pound of almonds, of which up to 1 cent will be credited to

handlers for their own promotional activities. The Board unanimously

recommended 1997-98 expenditures of $11,333,876.49 and an assessment

rate of 2 cents per pound of almonds. The assessment rate

[[Page 43461]]

of 2 cents is 1 cent more than the rate currently in effect. The

primary reason for the increase for the upcoming crop year is the

inclusion of funding for a generic paid advertising program.

The Board recommended that the major expenditures for the 1997-98

crop year should include $4,084,000 for information and research

programs, $3,408,000 for paid generic advertising, $881,534 for

salaries, $794,043 for international programs, $568,679 for production

research, $95,400 for crop estimates, and $90,000 for travel.

Alternative rates of assessment were considered during the budgeting

process. Keeping the assessment rate at 1 cent was considered but not

recommended because it would not generate the income necessary to

administer the program. In order to fund the programs recommended by

the Board for the 1997-98 season, it was determined that the assessment

rate recommended by the Board, when applied to the preliminary crop

estimate, would be necessary to generate sufficient revenue. Costs of

various programs, desired and overall spending levels, and desired

levels of monetary reserve were considered during the budgeting

process.

Handlers' receipts of assessable almonds for the year were

originally estimated at 681,600,000 pounds which would provide

$10,224,000 in assessment income. The crop estimate was subsequently

reduced to 652,800,000 pounds which if realized, would provide

assessment revenue of $9,792,000. However, in either scenario, income

derived from handler assessments, along with interest income, Market

Access Program reimbursement, research conference revenue,

miscellaneous income, and funds derived from the Board's authorized

reserve will be adequate to cover budgeted expenses. Funds in the

reserve will be kept within the maximum permitted by the order.

A review of historical information and preliminary information

pertaining to the upcoming crop year indicates that the grower price

for the 1997-98 season could range between $1.00 and $1.50 per pound of

almonds. Therefore, the estimated assessment revenue for the 1997-98

crop year as a percentage of total grower revenue could range between 1

and 1.5 percent.

While this rule will impose some additional costs on handlers, the

costs would be minimal and in the form of uniform assessments on all

handlers. Some of the additional costs may be passed on to producers.

However, these costs will be offset by the benefits derived by the

operation of the marketing order. In addition, the Board's meeting was

widely publicized throughout the California almond industry and all

interested persons were invited to attend the meeting and participate

in Board deliberations on all issues. Like all Board meetings, the May

9, 1997, meeting was a public meeting and all entities, both large and

small, were able to express views on this issue. Finally, interested

persons are invited to submit information on the regulatory and

informational impacts of this action on small businesses.

This final rule will not impose any additional reporting or

recordkeeping requirements on either small or large California almond

handlers. As with all Federal marketing order programs, reports and

forms are periodically reviewed to reduce information requirements and

duplication by industry and public sector agencies.

The Department has not identified any relevant Federal rules that

duplicate, overlap, or conflict with this rule.

A proposed rule concerning this action was issued by the Department

on July 3, 1997, and published in the Federal Register on July 7, 1997

(62 FR 36233). Copies of the proposed rule were also mailed or sent via

facsimile to all almond handlers. Finally, the proposal was made

available through the Internet by the Office of the Federal Register.

A 15-day comment period was provided to allow interested persons to

respond to the proposal. Fifteen days was deemed appropriate because:

(1) The Board needs to have sufficient funds to pay its expenses which

are incurred on a continuous basis; (2) the 1997-98 crop year began on

August 1, 1997, and the marketing order requires that the rate of

assessment for the crop year apply to all assessable California almonds

handled during the crop year; and (3) handlers are aware of this action

which was unanimously recommended by the Board at a public meeting and

is similar to other budget actions issued in past years. No comments to

the proposed rule were received.

After consideration of all relevant material presented, including

the information and recommendation submitted by the Board 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.

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 handlers are already receiving

1997-98 crop almonds from growers, the crop year began August 1, and

the assessment rate applies to all almonds received during the 1997-98

and subsequent seasons. Further, handlers are aware of this rule, which

was recommended at a public meeting. Also, A 15-day comment period was

provided for in the proposed rule, and no comments were received.

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.

Sec. 981.343 [Amended]

2. Section 981.343 is amended by removing ``July 1, 1996,'' and

adding in its place ``August 1, 1997,'', by removing ``$0.01 cent'' and

adding in its place ``2 cents,'' and by adding as the last sentence

``Of the 2 cent assessment rate, 1 cent per assessable pound is

available for handler credit-back.''

Dated: August 8, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-21525 Filed 8-13-97; 8:45 am]

BILLING CODE 3410-02-P