Almonds Grown in California; Increased Assessment Rate

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV98-981-2 FR]

Almonds Grown in California; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule increases the assessment rate from $0.02 to $0.025

per pound of almonds 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 crop year began on August 1 and ends July 31. The

assessment rate will remain in effect indefinitely unless modified,

suspended, or terminated.

EFFECTIVE DATE: September 15, 1998.

FOR FURTHER INFORMATION CONTACT: Diane Purvis, Marketing Assistant, or

Martin J. Engeler, Marketing Specialist, California Marketing Field

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

Suite 102B, Fresno, California 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 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 increases 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, will generate adequate revenue to fund the recommended

expenses and programs. The Board also recommended to continue the

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

promotional activities of up to $0.0125 per pound against their

assessment obligation. Handlers not participating in this program will

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

[[Page 48996]]

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. Budgeted expenses for these items in

1997-98 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 will 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 will 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

will 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 (Sec. 981.81).

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 will be in effect for an indefinite

period, the Board will 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 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 1998-99 budget has been approved; 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 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 increases 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 1998-99 expenditures of $13,049,437 and an assessment rate

of $0.025 per pound. This is compared to $11,333,876 budgeted for the

1997-98 crop year and an assessment rate of $0.025 for 1998-99 that is

$.005 higher than the 1997-98 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 and programs. Any unexpended funds

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

the succeeding 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.

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 will help generate adequate revenue to fund

the recommended expenses and programs.

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 per pound of assessable almonds is

necessary to generate adequate revenue to fund the recommended expenses

and programs.

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.

[[Page 48997]]

This action increases 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

are 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.

This rule imposes 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 proposed rule concerning this action was published in the Federal

Register on July 24, 1998 (63 FR 39755). 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 30-day comment period ending August 24, 1998, was provided for

interested persons to respond to the proposal. One comment in support

of the proposed rule was received from a large cooperative handler.

This handler supports increasing the assessment rate and continuing the

credit-back program mentioned earlier.

The proposed regulatory language in Sec. 981.343 incorrectly stated

that the assessment rate of $0.025 per pound of assessable almonds

would apply on and after June 4, 1998. The date should have been August

1, 1998, and has been corrected.

After consideration of all relevant material presented, including

the information and recommendation submitted by the Board, the comment

received, 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.

Pursuant to 5 U.S.C. 553, it also found and determined that good

cause exists for not postponing the effective date of this rule until

30 days after publication in the Federal Register because the 1998-99

crop year began on August 1, 1998, and the marketing order requires the

assessment rate to apply to all almonds received during the 1998-99 and

subsequent crop years. Further, handlers are already receiving 1998-99

crop year almonds from growers, the Board needs to have sufficient

funds to cover its expenses that are incurred on a continuous basis,

and handlers are aware of this rule which was recommended unanimously

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

the proposed rule, and a comment was received in support of this action

from a large cooperative almond handler.

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.

2. Section 981.343 is revised to read as follows:

Sec. 981.343 Assessment rate.

On and after August 1, 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: September 8, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-24535 Filed 9-11-98; 8:45 am]

BILLING CODE 3410-02-U