Almonds Grown in California; Increased Assessment Rate

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV98-981-2 PR]

Almonds Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule would increase the assessment rate from $0.02 to

$0.025 per pound established for the Almond Board of California (Board)

under Marketing Order No. 981 for the 1998-99 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. The fiscal period begins August 1 and ends July 31. The

assessment rate would remain in effect indefinitely unless modified,

suspended, or terminated.

DATES: Comments must be received by August 24, 1998.

ADDRESSES: Interested persons are invited to submit written comments

concerning this rule. Comments must be sent to the Docket Clerk, Fruit

and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456,

Washington, DC 20090-6456; Fax: (202) 205-6632. 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: Diane Purvis, Marketing Assistant, and

Martin J. Engeler, Marketing Specialist, California Marketing Field

Office, Fruit and Vegetable Programs, AMS, USDA, 2202 Monterey Street,

Suite 102B, Fresno, CA 93721; telephone: (209) 487-5901, Fax: (209)

487-5906; or George Kelhart, Technical Advisor, Marketing Order

Administration Branch, Fruit and Vegetable Programs, AMS, USDA, room

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

720-2491, Fax: (202) 205-6632. Small businesses may request information

on compliance with this regulation by contacting Jay Guerber, Marketing

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

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

(202) 720-2491, Fax: (202) 205-6632.

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 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 on August 1, 1998, and continue 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.

This rule would increase the assessment rate established for the

Board for the 1998-99 and subsequent crop years from $0.02 per pound to

$0.025 per pound.

The California 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.

For the 1997-98 and subsequent crop years, the Board recommended,

and the Department approved, an assessment rate that would continue in

effect from crop year to crop year unless modified, suspended, or

terminated by the Secretary upon recommendation and information

submitted by the Board or other information available to the Secretary.

The Board met on June 4, 1998, and unanimously recommended 1998-99

expenditures of $13,049,437 and an assessment rate of $0.025 per pound

of almonds. In comparison, last year's budgeted expenditures were

$11,333,876. The assessment rate of $0.025 is $.005 higher than the

rate currently in effect. The higher rate is needed primarily because

of a smaller crop this year. The 1997-98 crop was initially estimated

at 681,600,000 pounds compared to 528,000,000 pounds estimated for the

1998-99 crop year. The higher assessment rate, when combined with other

revenue sources, would generate adequate revenue to fund the

recommended programs. The Board also recommended to continue the

credit-back program whereby handlers could receive credit for their own

promotional activities of up to $0.0125 per pound against their

assessment obligation. Handlers not

[[Page 39756]]

participating in this program would remit the entire $0.025 to the

Board.

The major expenditures recommended by the Board for the 1998-99

crop year include $4,500,000 for paid generic advertising, $2,500,000

for other domestic promotion programs, $1,495,000 for international

promotion, $1,144,842 for salaries, $700,000 for nutrition research,

$548,207 for production research, $155,000 for market research,

$125,000 for travel, $124,700 for quality control programs, $100,700

for crop estimates, and $100,000 for compliance audits.

Comparable expenditures recommended by the Board for the 1997-98

crop year were $3,408,000 for paid generic advertising, $3,174,000 for

other domestic promotion programs, $794,043 for international

promotion, $881,534 for salaries, $695,000 for nutrition research,

$568,679 for production research, $125,000 for market research, $90,000

for travel, $152,175 for quality control programs, $95,400 for crop

estimates, and $92,500 for compliance audits.

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 an estimate of 528,000,000 pounds of assessable almonds

for the 1998-99 crop year. If realized, this would provide estimated

assessment revenue of $6,600,000 from all handlers, and an additional

$3,630,000 from those handlers who do not participate in the credit-

back program, for a total of $10,230,000. In addition, it is

anticipated that $2,819,437 would be provided by other sources,

including interest income, Market Access Program reimbursement from the

Department for international promotion activities, revenue generated

from the Board's annual research conference, miscellaneous income,

funds derived from the Board's authorized monetary reserve, and a grant

from the State of California. When combined, revenue from these sources

would be adequate to cover budgeted expenses. Any unexpended funds from

the 1998-99 crop year may be carried over to cover expenses during the

succeeding crop year. Funds in the reserve at the end of the 1998-99

crop year are estimated to be approximately $3,500,000, which is within

the maximum of approximately six months budgeted expenses as permitted

by the order.

The proposed assessment rate would 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 would be in effect for an indefinite

period, the Board would continue to meet prior to or during each crop

year to recommend a budget of expenses and consider recommendations for

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

meetings are available from the Board or the Department. Board meetings

are open to the public and interested persons may express their views

at these meetings. The Department would evaluate Board recommendations

and other available information to determine whether modification of

the assessment rate is needed. Further rulemaking would be undertaken

as necessary. The Board's 1998-99 budget and those for subsequent crop

years would 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 initial 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 7,000 producers of almonds in the

production area and approximately 102 handlers subject to regulation

under the marketing order. Small agricultural producers have been

defined by the Small Business Administration (13 CFR 121.601) as those

having annual receipts less than $500,000, and small agricultural

service firms are defined as those whose annual receipts are less than

$5,000,000.

Currently, about 57 percent of the handlers ship under $5,000,000

worth of almonds and 43 percent ship over $5,000,000 worth of almonds

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

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

annual grower revenue is estimated to be approximately $160,000. 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 rule would increase the assessment rate established for the

Board and collected from handlers for the 1998-99 and subsequent crop

years from $0.02 per pound to $0.025 per pound. The Board unanimously

recommended the increased assessment rate, and 1998-99 expenditures of

$13,049,437. The proposed assessment rate of $0.025 is $0.005 higher

than the current rate. The quantity of assessable almonds for the 1998-

99 crop year is estimated at 528,000,000 pounds. Income from

assessments and other sources is expected to generate sufficient

revenue to fund this year's expenses. Any unexpended funds from the

1998-99 crop year may be carried over to cover expenses during the

succeeding crop year.

The higher assessment rate is needed primarily because of a smaller

crop this year. The 1997-98 assessable crop was initially estimated at

681,600,000 pounds, compared to 528,000,000 for the 1998-99 crop year.

The higher assessment rate would help generate adequate revenue to fund

the recommended programs.

The Board reviewed and unanimously recommended 1998-99 expenditures

of $13,049,437, compared to $11,333,876 budgeted for the 1997-98 crop

year. The major expenditures recommended by the Board for the 1998-99

crop year include $4,500,000 for paid generic advertising, $2,500,000

for other domestic promotion programs, $1,495,000 for international

promotion, $1,144,842 for salaries, $700,000 for nutrition research,

$548,207 for production research, $155,000 for market research,

$125,000 for travel, $124,700 for quality control programs, $100,700

for crop estimates, and $100,000 for compliance audits.

Comparable expenditures recommended by the Board for the 1997-98

crop year were $3,408,000 for paid generic advertising, $3,174,000 for

other domestic promotion programs, $794,043 for international

promotion, $881,534 for salaries, $695,000 for nutrition research,

$568,679 for production research, $125,000 for market research, $90,000

for travel, $152,175 for quality control programs, $95,400 for crop

estimates, and $92,500 for compliance audits.

Prior to arriving at the recommended expenditure level and

assessment rate, the Board considered alternatives and ultimately

concurred on the recommended programs and expenditure level, and

determined a rate of $0.025 would be necessary to generate adequate

revenue to fund the recommended programs.

[[Page 39757]]

A review of historical information and preliminary information

pertaining to the upcoming crop year indicates that the grower price

for the 1998-99 season could range between $1.50 and $2.00 per pound of

almonds. Therefore, the estimated assessment revenue for the 1998-99

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

.97 and 1.3 percent.

This action would increase the assessment obligation imposed on

handlers. While assessments impose some additional costs on handlers,

the costs are minimal and uniform on all handlers. Some of the

additional costs may be passed on to producers. However, these costs

would 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 June 4, 1998,

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 proposed rule would impose no 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 30-day comment period is provided to allow interested persons to

respond to this proposed rule. Thirty days is deemed appropriate

because: (1) The Board needs to have sufficient funds to pay its

expenses which are incurred on a continuous basis; (2) the 1998-99 crop

year begins on August 1, 1998, and the marketing order requires that

the rate of assessment for each crop year apply to all assessable

almonds handled in such crop year; and (3) handlers are aware of this

action which was unanimously recommended by the Board at a public

meeting.

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 981.343 is proposed to be revised to read as follows:

Sec. 981.343 Assessment rate.

On and after June 4, 1998, an assessment rate of $0.025 per pound

is established for California almonds. Of the $0.025 assessment rate,

$0.0125 per assessable pound is available for handler credit-back.

Dated: July 21, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-19888 Filed 7-23-98; 8:45 am]

BILLING CODE 3410-02-P