Fresh Cut Flowers and Fresh Cut Greens Promotion and Information Order; Referendum Procedures

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1208

[FV-97-701FR]

Fresh Cut Flowers and Fresh Cut Greens Promotion and Information

Order; Referendum Procedures

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule provides procedures that the Department of

Agriculture (Department) will use in conducting the referendum to

determine whether to continue the Fresh Cut Flowers and Fresh Cut

Greens Promotion and Information Order (Order). In order to continue,

the program must be approved by a simple majority of the qualified

handlers voting in the referendum.

EFFECTIVE DATE: This rule is effective from May 14, 1997 through August

15, 1997.

FOR FURTHER INFORMATION CONTACT: Sonia N. Jimenez, Research and

Promotion Branch, Fruit and Vegetable Division, AMS, USDA, P.O. Box

96456, Room 2535-S, Washington, DC 20090-6456, telephone (202) 720-9916

or (888) 720-9917.

SUPPLEMENTARY INFORMATION: This rule is issued under the Fresh Cut

Flowers and Fresh Cut Greens Promotion and Information Act of 1993 (7

U.S.C. 6801 et seq.), hereinafter referred to as the Act, and the

Order.

This rule provides the procedures under which the referendum will

be conducted.

Executive Order 12988

This rule has been reviewed under Executive Order 12988, Civil

Justice Reform. It is not intended to have retroactive effect. 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 8 of the Act,

after an Order is implemented, a person subject to the Order may file a

petition with the Secretary stating that the Order or 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 an exemption from the Order. The petitioner is afforded the

opportunity for a hearing on the petition. After such hearing, the

Secretary will make a ruling on the petition. The Act provides that the

district courts of the United States in any district in which a person

who is a petitioner resides or carries on business are vested with

jurisdiction to review the Secretary's ruling on the petition, if a

complaint for that purpose is filed within 20 days after the date of

the entry of the ruling.

Executive Order 12866 and Regulatory Flexibility Act

This rule has been determined not significant for purposes of

Executive Order 12866, and therefore has not been reviewed by the

Office of Management and Budget.

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et

seq.), the Agency has examined the impact of this rule on small

entities. Accordingly, we have performed this Final Regulatory

Flexibility Analysis.

The Act, which authorizes the creation of a generic program of

promotion and information for fresh cut flowers and greens, became

effective on December 14, 1993.

Section 7 of the Act provides that the Secretary of Agriculture

(Secretary) shall conduct a referendum not later than 3 years after the

issuance of an order to ascertain whether the order then in effect

shall be continued. The Order was issued on December 29, 1994.

Paragraph (a)(2) of section 7 of the Act requires that the Order be

approved by a simple majority of all votes cast in the referendum. In

addition, paragraph (b) of section 7 of the Act specifies that each

qualified handler eligible to vote in the referendum shall be entitled

to cast one vote for each separate facility of the person that is an

eligible separate facility. Eligible separate facility is defined in

paragraph (b)(2) of section 7 of the Act as a handling or marketing

facility of a qualified handler that is physically located away from

other facilities of the qualified handler or that the business function

of the separate facility is substantially different from the functions

of other facilities owned or operated by the qualified handler and the

annual sales of cut flowers and cut greens to retailers and exempt

handlers from the facility are $750,000 or more annually.

Only those wholesale handlers (including but not limited to,

wholesale jobbers, bouquet and floral article manufacturers, auction

houses that clear the sale of cut flowers and greens, and retail

distribution centers), producers and importers who have annual sales of

$750,000 or more of fresh cut flowers and greens and who sell those

products to exempt handlers, retailers, or consumers are considered

qualified handlers and assessed under the Order.

The referendum procedures provide definitions of who is eligible to

vote and instructions for referendum agents regarding subagents,

publicity for the referendum and the results, ballots, voting, ballot

handling and tabulation, reporting, and confidentiality of referendum

materials. The representative period for establishing voter eligibility

for the referendum will be announced by the Secretary in a separate

referendum order published later in the Federal Register.

There are approximately 525 wholesale handlers, 84 importers, and

83 producers who are qualified handlers. Small agricultural service

firms, which include the qualified handlers covered under the Order,

have been defined by the Small Business Administration (SBA) (13 CFR

121.601) as those whose annual receipts are less than $5 million. Only

127 qualified handlers have been identified to have $5 million in

annual sales.

It is concluded that the majority of qualified handlers may be

classified as small entities.

Statistics reported by the National Agricultural Statistics Service

show that in 1995 sales of domestic cut flowers and cut greens totaled

approximately $521.3 million at the wholesale level. The leading

producing states by wholesale value are California, with about 49

percent of the total of flower and cut green production, followed by

Florida, Colorado and Hawaii. Sales information for 1996 will not be

available until after publication of this rule.

Exports in 1996 of U.S. cut flowers were valued at $29.4 million,

with about 52 percent of the value from exports to Canada, and 16

percent from exports to the Netherlands, about 14 percent from exports

to Germany, and 13 percent

[[Page 18034]]

from exports to Japan. Exports of cut greens are not reported by the

Bureau of the Census as a separate item; they are included in a

``basket'' export category that includes other types of fresh cut plant

exports such as branches without flowers or buds, evergreens, and

grasses, which are suitable for ornamental purposes. In 1996 the value

of these exports was $52.0 million. In 1995, the value of exports was

$45.8 million.

The value of imports of cut flowers in 1996 was $557.7 million.

Major countries exporting cut flowers to the United States, by value,

are Colombia which accounts for about 66 percent of the value, followed

by the Netherlands (10 percent), Ecuador (12 percent), Costa Rica (3

percent), and Mexico (3 percent). Imports of cut greens are reported in

a category that includes some other fresh cut plant items suitable for

ornamental purposes such as grasses, branches without flowers or buds,

and other plant parts, but excludes fresh evergreens. In 1996 this

``basket category'' of imports had a value of $27.6 million. The value

of imports of cut flowers in 1995 was $495.2 million with a ``basket

category'' of $24.1 million.

This rule provides the procedures under which qualified handlers

may vote on whether they want the fresh cut flowers and fresh cut

greens promotion and information program to be continued. Qualified

handlers of $750,000 or more in annual gross sales are eligible to vote

in the referendum. There are approximately 692 eligible voters

representing approximately 923 votes some of which represent separate

facilities. It will take an average of 15 minutes for each voter to

read the voting instructions and complete the referendum ballot. The

total burden on the total number of voters will be 77 hours.

The Department is keeping all these individuals informed throughout

the referendum process to ensure that they are aware of and are able to

participate in the process. In addition, trade associations and related

industry media will receive news releases and other information

regarding the referendum process.

Voting in the referendum is optional. However, if qualified

handlers choose to vote, the burden of voting will be offset by the

benefits of having the opportunity to vote on whether they want to

continue the program or not.

The Department considered requiring eligible voters to vote in

person at various Department offices across the country. However,

conducting the referendum from one central location by mail ballot is

more cost effective for this program. Also, the Department will provide

easy access to information for potential voters through a toll free

telephone line. A referendum will be conducted in June to maximize

industry participation.

Lastly, in the initial regulatory flexibility analysis comments

were requested regarding the impact of the rule on small entities. No

such comments were received.

Paperwork Reduction Act

In accordance with the Office of Management and Budget (OMB)

regulations (5 CFR Part 1320) which implements the Paperwork Reduction

Act of 1995 (44 U.S.C. Chapter 35), the referendum ballot has been

approved by the Office of Management and Budget (OMB) and has been

assigned OMB number 0581-0093. It is estimated that there are 692

qualified handlers, representing 923 votes, who will be eligible to

vote in the referendum. It will take an average of 15 minutes for each

voter to read the voting instructions and complete the referendum

ballot. The total burden on the total number of voters will be 77

hours.

Background

The Act authorized the Secretary to establish a national cut

flowers and cut greens promotion and consumer information program. The

program is funded by an assessment of \1/2\ percent of gross sales of

cut flowers and greens which is levied on qualified handlers. The

program is administered by the National PromoFlor Council (Council)

under the supervision of the Department of Agriculture (Department).

Assessments are used to pay for: Research, promotion, and consumer

information; administration, maintenance, and functioning of the Board;

and expenses incurred by the Secretary in implementing and

administering the Order, including referendum costs.

Section 7 of the Act requires that a referendum be conducted not

later than 3 years after the issuance of the Order among eligible

qualified handlers of fresh cut flowers and fresh cut greens to

determine whether they favor continuance of the Order. The Order shall

continue in effect if it is approved by a simple majority of qualified

handlers voting in the referendum.

In accordance with section 3(4) of the Act, qualified handler is

defined in the Order as a person operating in the cut flowers and

greens marketing system that sells domestic or imported cut flowers and

greens to retailers and exempt handlers and whose annual sales of cut

flowers and greens to retailers and exempt handlers are $750,000 or

more. The term also includes, but is not limited to, the following

entities when they have the requisite volume of $750,000 sales of cut

flowers and greens a year: A wholesale handler; a manufacturer of

bouquets or floral articles for sale to retailers if the cut flowers

and greens used are a substantial portion of the value of the

manufactured floral article; an auction house that clears the sale of

cut flowers and greens to retailers and exempt handlers through a

central clearinghouse; a distribution center that is owned or

controlled by a retailer if the predominant retail business activity is

floral sales; an importer whose principal activity is the importation

of cut flowers and greens into the United States and sells to retailers

and exempt handlers or directly to consumers; and a producer that sells

cut flowers and cut greens directly to retailers or consumers.

Paragraph (b) of section 7 of the Act specifies that each qualified

handler eligible to vote in the referendum shall be entitled to cast

one vote for each separate facility of the person that is an eligible

separate facility. Eligible separate facility is defined in paragraph

(b)(2) of section 7 of the Act as a handling or marketing facility of a

qualified handler that is physically located away from other facilities

of the qualified handler or that the business function of the separate

facility is substantially different from the functions of other

facilities owned or operated by the qualified handler and the annual

sales of cut flowers and cut greens to retailers and exempt handlers

from the facility are $750,000 or more annually.

This rule provides the procedures under which fresh cut flowers and

greens qualified handlers may vote on whether they want the fresh cut

flowers and greens promotion and consumer information program to

continue. Qualified handlers of $750,000 gross sales annually can vote

in the referendum. There are approximately 692 eligible voters

representing approximately 923 votes.

This rule adds a new subpart which establishes procedures to be

used in the referendum. This subpart will be in effect for the

referendum period only and will not be part of the Code of Federal

Regulations. This subpart covers definitions, voting, instructions, use

of subagents, ballots, the referendum report, and confidentiality of

information.

A proposed rule was published in the March 19, 1997, issue of the

Federal Register (62 FR 12976). Ten comments were received and are

addressed in this rule. The comments were from qualified

[[Page 18035]]

handlers and the National PromoFlor Council.

A comment was received from a cut flowers and greens wholesale

handler. The commentor expressed the view that it would be

unconstitutional for a company to qualify for more than one vote

because the company has decided to distribute their product through

multiple locations instead of one central location. The commentor

opposes multiple votes for a single company.

As previously explained in this rule, paragraph (b) of section 7 of

the Act specifies that each qualified handler eligible to vote in the

referendum shall be entitled to cast one vote for each separate

facility that is an eligible separate facility. Separate facility is

defined in the Act as a handling or marketing facility of a qualified

handler that is physically located away from other facilities of the

qualified handler or that the business function of the separate

facility is substantially different from the functions of other

facilities owned or operated by the qualified handler and the annual

sales of cut flowers and greens to retailers and exempt handlers from

the facility are $750,000 or more annually.

A facility may be located separately from the main operation of the

qualified handlers or the function of the facility may be substantially

different in order to qualify under the definition of separate

facility. Each separate facility must handle $750,000 annually in sales

to retailers and exempted handlers. The concept of one vote per

facility is not unknown for this type of program and referendum. It

became part of the legislation authorizing this program. Alternatively,

the statute could have, but did not, provide for a weighted vote, under

which both the number of votes and annual sales volume of voters, for

and against continuation of the program, would have been tabulated.

The commentor also stated that the Council forces companies under

$750,000 annual sales to pay the assessment because the companies that

they buy from are forced to pay the assessment. In addition, the

commentor stated that it is unconstitutional to force people to pay

their tax and not allow them a vote.

The Act requires qualified handlers of $750,000 annual sales to pay

the assessment. Exempt handlers are not required to pay the assessment.

It is a business decision between the parties involved, and not a

statutory requirement or provision, as to whether the qualified handler

passes the cost to the exempt handler and whether the exempt handler

pays that charge. Each qualified handler as defined under the Act is

eligible to vote in the referendum.

The commentor requested the USDA to stop the Council from using

funds to influence the vote in the referendum. Funds collected under

this program may not be used for activities that are not authorized

under the Act. The Department monitors activities in this area very

carefully. The Council may explain what the program is doing and its

impact on sales. It may also encourage the industry to vote. However,

it may not encourage the industry to vote in a particular way.

Finally, the commentor requested a definition of qualified handler

in the voting process. The definition of qualified handlers used for

the referendum is the same used for determining who is qualified under

the program. The status of the handler, i.e., paying or not paying

assessments, against or in favor of the program, does not affect the

definition of who is a qualified handler under the program and eligible

to vote. Every qualified handler as defined in the Act and the Order is

eligible to vote in the referendum.

Five commentors stated that the timing for the referendum is

unfortunate in that it falls within the peak sales months for the

industry. In addition, the commentors stated that the period from July

to September is ideal for all qualified handlers to have the time to

adequately evaluate the impact of the program. Furthermore, the

commentors requested that the referendum be conducted in September.

The Council, however, submitted a comment in favor of holding the

referendum in June for the following reasons: timely preparation and

submission of a 1998 budget for the Department's approval prior to the

start of the new fiscal period; a June referendum will allow the

Council to buy media in the ``up front market'' when the selection of

commercial slots is better and the prices are discounted; a June

referendum will allow the Council to produce these commercials in an

area at a considerable savings; the handlers are ready for a

referendum; the Council is reporting to the industry the effects of the

program and the return on investment to handlers; qualified handlers

feel well informed about the program and are prepared to make an

informed decision; the Council communicates its programs twice a month

through its newsletter; qualified handlers have received video tapes

and an annual report with information about the program; almost every

trade publication has carried information about the Council for the

last year; the Council is present at every major show and convention to

answer questions; and the Council has a toll free number to answer

questions.

The Department agrees that the referendum must be conducted during

a period that maximizes voting representation. June is after the peak

period of Secretary's Day and Mother's Day. In addition, if the program

is supported in the referendum, conducting the referendum in June will

allow enough time for the Council to plan a budget and marketing plan

for the 1998 fiscal year which begins on October 1, 1997. The

Department believes that conducting the referendum in June will

maximize participation in the referendum and will assist the Council in

the planning of next year's program in the event the program is

approved in the referendum. In addition, the industry is familiar with

the program which has been in effect since December 1994 and has had

time to form a view on whether the program should continue. Further,

voting is not a time-consuming process.

One commentor stated that qualified handlers that paid assessments

in the past and are out of business or whose businesses have changed

and are no longer qualified handlers should be allowed to vote in the

referendum.

A qualified handlers whose gross sales of fresh cut flowers and

greens were $750,000 during the representative period and who is a

qualified handler at the time of the referendum, is eligible to vote.

The representative period, the period used to determine who is an

eligible qualified handler for referendum purposes, will be announced

in a referendum order that will be published separately in the Federal

Register. A handler who is not a qualified handler at the time of the

referendum should not be eligible to vote because this individual is

not currently covered by the program and is not required to pay

assessments into the program.

Two of the comments received addressed issues not directly related

to the referendum procedures. Instead they related to the program in

general including the financial impact of assessments.

Accordingly, no changes to the text of the regulation as proposed

are made in this final rule. After consideration of all relevant

material presented, it is found that this final rule effectuates the

declared policy of the Act.

List of Subjects in 7 CFR Part 1208

Administrative practice and procedure, Advertising, Consumer

information, Marketing agreements, Cut

[[Page 18036]]

flowers, Cut greens, Promotion, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, Title 7 of Chapter XI of

the Code of Federal Regulations is amended as follows:

1. Part 1208 is amended by adding a new subpart C to read as

follows:

PART 1208--FRESH CUT FLOWERS AND FRESH CUT GREENS PROMOTION AND

INFORMATION ORDER

Subpart C--Procedure for the Conduct of Referenda in Connection With

the Fresh Cut Flowers and Fresh Cut Greens Promotion and Information

Order

Sec.

1208.200 General.

1208.201 Definitions.

1208.202 Voting.

1208.203 Instructions.

1208.204 Subagents.

1208.205 Ballots.

1208.206 Referendum report.

1208.207 Confidential information.

Authority: 7 U.S.C. 6801 et seq.

Subpart C--Procedure for the Conduct of Referenda in Connection

With the Fresh Cut Flowers and Fresh Cut Greens Promotion and

Information Order

Sec. 1208.200 General.

A referendum to determine whether qualified handlers favor

continuance of the Fresh Cut Flowers and Fresh Cut Greens Promotion and

Information Order shall be conducted in accordance with these

procedures.

Sec. 1208.201 Definitions.

Unless otherwise defined below, the definition of terms used in

these procedures shall have the same meaning as the definitions in the

Order.

(a) Administrator means the Administrator of the Agricultural

Marketing Service, with power to redelegate, or any officer or employee

of the Department to whom authority has been delegated or may hereafter

be delegated to act in the Administrator's stead.

(b) Order means the Fresh Cut Flowers and Fresh Cut Greens

Promotion and Information Order.

(c) Referendum agent or agent means the individual or individuals

designated by the Secretary to conduct the referendum.

(d) Representative period means the period designated by the

Secretary.

(e) Person means any individual, group of individuals, firm,

partnership, corporation, joint stock company, association, society,

cooperative, or any other legal entity. For the purpose of this

definition, the term ``partnership'' includes, but is not limited to:

(1) A husband and wife who has title to, or leasehold interest in,

fresh cut flowers and greens facilities and equipment as tenants in

common, joint tenants, tenants by the entirety, or, under community

property laws, as community property, and

(2) So-called ``joint ventures'', wherein one or more parties to

the agreement, informal or otherwise, contributed capital and others

contributed labor, management, equipment, or other services, or any

variation of such contributions by two or more parties so that it

results in the handling of fresh cut flowers and greens and the

authority to transfer title to the fresh cut flowers and greens

handled.

(f) Eligible qualified handler means a person who is a qualified

handler under Sec. 1208.16 of the Order that operates in the cut

flowers and greens marketing system and sells domestic or imported cut

flowers and greens to retailers and exempt handlers and has annual

sales of cut flowers and greens to retailers and exempt handlers that

are $750,000 or more.

(g) Separate facility means a handling or marketing facility of a

qualified handler that is physically located away from other facilities

of the qualified handler or that the business function of the separate

facility is substantially different from the functions of other

facilities owned or operated by the qualified handler and the annual

sales of cut flowers and cut greens to retailers and exempt handlers

from the facility are $750,000 or more annually.

Sec. 1208.202 Voting.

(a) Each person who is an eligible qualified handler as defined in

this subpart, at the time of the referendum and during the

representative period, shall be entitled to cast one vote for each

separate facility of the person that is an eligible separate facility.

(b) Proxy voting is not authorized, but an officer or employee of

an eligible qualified handler, or an administrator, executor, or

trustee of an eligible qualified handler entity may cast a ballot on

behalf of such qualified handler entity. Any individual so voting in a

referendum shall certify that such individual is an officer or employee

of the eligible qualified handler, or an administrator, executor, or

trustee of an eligible qualified handler entity, and that such

individual has the authority to take such action. Upon request of the

referendum agent, the individual shall submit adequate evidence of such

authority.

(c) All ballots are to be cast by mail.

Sec. 1208.203 Instructions.

The referendum agent shall conduct the referendum, in the manner

herein provided, under the supervision of the Administrator. The

Administrator may prescribe additional instructions, not inconsistent

with the provisions hereof, to govern the procedure to be followed by

the referendum agent. Such agent shall:

(a) Determine the time of commencement and termination of the

period during which ballots may be cast.

(b) Provide ballots and related material to be used in the

referendum. Ballot material shall provide for recording essential

information including that needed for ascertaining whether the person

voting, or on whose behalf the vote is cast, is an eligible voter;

(c) Give reasonable advance public notice of the referendum:

(1) By utilizing available media or public information sources,

without incurring advertising expense, to publicize the dates, places,

method of voting, eligibility requirements, and other pertinent

information. Such sources of publicity may include, but are not limited

to, print and radio; and

(2) By such other means as the agent may deem advisable.

(d) Mail to eligible qualified handlers, whose names and addresses

are known to the referendum agent, the instructions on voting, a

ballot, and a summary of the terms and conditions of the Order. No

person who claims to be eligible to vote shall be refused a ballot.

(e) At the end of the voting period, collect, open, number, and

review the ballots and tabulate the results in the presence of an agent

of the Office of Inspector General.

(f) Prepare a report on the referendum.

(g) Announce the results to the public.

Sec. 1208.204 Subagents.

The referendum agent may appoint any individual or individuals

deemed necessary or desirable to assist the agent in performing such

agent's functions hereunder. Each individual so appointed may be

authorized by the agent to perform any or all of the functions which,

in the absence of such appointment, shall be performed by the agent.

Sec. 1208.205 Ballots.

The referendum agent and subagents shall accept all ballots cast;

but, should they, or any of them, deem that a ballot should be

questioned for any reason, the agent or subagent shall endorse above

[[Page 18037]]

their signature, on the ballot, a statement to the effect that such

ballot was questioned, by whom questioned, the reasons therefore, the

results of any investigations made with respect thereto, and the

disposition thereof. Ballots invalid under this subpart shall not be

counted.

Sec. 1208.206 Referendum report.

Except as otherwise directed, the referendum agent shall prepare

and submit to the Administrator a report on results of the referendum,

the manner in which it was conducted, the extent and kind of public

notice given, and other information pertinent to analysis of the

referendum and its results.

Sec. 1208.207 Confidential information.

The ballots and other information or reports that reveal, or tend

to reveal, the vote of any person covered under the Act and the voting

list shall be held confidential and shall not be disclosed.

Dated: April 8, 1997.

Sharon Bomer Lauritsen,

Acting Director, Fruit and Vegetable Division.

[FR Doc. 97-9569 Filed 4-11-97; 8:45 am]

BILLING CODE 3410-02-P