Oranges and Grapefruit Grown in Lower Rio Grande Valley in Texas; Decreased Assessment Rate

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 906

[Docket No. FV98-906-1 FIR]

Oranges and Grapefruit Grown in Lower Rio Grande Valley in Texas;

Decreased Assessment Rate

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, the provisions of an interim final rule

which decreased the assessment rate, from $0.125 to $0.11 per \7/10\

bushel carton, established for the Texas Valley Citrus Committee

(Committee) under Marketing Order No. 906 for the 1998-99 and

subsequent fiscal periods. The Committee is responsible for local

administration of the marketing order which regulates the handling of

oranges and grapefruit grown in the Lower Rio Grande Valley in Texas.

Authorization to assess orange and grapefruit handlers enables the

Committee to incur expenses that are reasonable and necessary to

administer the program. The fiscal period began on August 1 and ends

July 31. The assessment rate will remain in effect indefinitely unless

modified, suspended, or terminated.

EFFECTIVE DATE: November 12, 1998.

FOR FURTHER INFORMATION CONTACT: Belinda G. Garza, McAllen Marketing

[[Page 54554]]

Field Office, Fruit and Vegetable Programs, AMS, USDA, 1313 E.

Hackberry, McAllen, TX 78501; telephone: (956) 682-2833, Fax: (956)

682-5942; 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

Agreement and Order No. 906 (7 CFR part 906), regulating the handling

of oranges and grapefruit grown in the Lower Rio Grande Valley in

Texas, hereinafter referred to as the ``order.'' The marketing

agreement and order are 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 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, orange and

grapefruit handlers in the Lower Rio Grande Valley in Texas 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 oranges and grapefruit 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 continues to decrease the assessment rate established for

the Committee for the 1998-99 and subsequent fiscal periods from $0.125

per \7/10\ bushel carton to $0.11 per \7/10\ bushel carton handled.

The Texas orange and grapefruit marketing order provides authority

for the Committee, 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 Committee are producers and

handlers of Texas oranges and grapefruit. They are familiar with the

Committee'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 1996-97 and subsequent fiscal periods, the Committee

recommended, and the Department approved, an assessment rate that would

continue in effect from fiscal period to fiscal period unless modified,

suspended, or terminated by the Secretary upon recommendation and

information submitted by the Committee or other information available

to the Secretary.

The Committee met on June 10, 1998, and unanimously recommended

1998-99 expenditures of $1,172,950 and an assessment rate of $0.11 per

\7/10\ bushel carton of oranges and grapefruit handled. On August 18,

1998, the Committee met again and unanimously approved a $9,000

increase to the 1998-99 budget, which increased the total budget to

$1,181,950. In comparison, last year's budgeted expenditures were

$1,100,478. The assessment rate of $0.11 is $0.015 lower than the rate

previously in effect. The Committee voted to lower its assessment rate

and use more of the reserve to cover its expenses. The assessment rate

decrease was necessary to bring expected assessment income closer to

the amount necessary to administer the program for the 1998-99 fiscal

period. At the previous rate, assessment income would have exceeded

anticipated expenses by about $5,550, and the projected reserve on July

31, 1999, would have exceeded the level the Committee believes adequate

to administer the program.

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

fiscal period include $768,700 for advertising and promotion and

$179,000 for the Mexican Fruit Fly support program. Budgeted expenses

for these items in 1997-98 were $712,000 and $170,000, respectively.

Budget increases for 1998-99 (with the 1997-98 budgeted amounts in

parentheses) include administrative at $68,313 ($64,548) and compliance

at $73,369 ($71,112). A new budget item for 1998-99 includes funds

totaling $14,000 for promotion program evaluation.

The assessment rate recommended by the Committee was derived by

dividing anticipated expenses by expected shipments of Texas oranges

and grapefruit. Texas orange and grapefruit shipments for the year are

estimated at 9.5 million cartons which should provide $1,045,000 in

assessment income. Income derived from handler assessments, along with

interest income and funds from the Committee's authorized reserve, will

be adequate to cover budgeted expenses. Funds in the reserve (currently

$270,000) will be kept within the maximum permitted by the order

(approximately one fiscal periods' expenses; Sec. 906.35).

The assessment rate will continue in effect indefinitely unless

modified, suspended, or terminated by the Secretary upon recommendation

and information submitted by the Committee or other available

information.

Although this assessment rate is effective for an indefinite

period, the Committee 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 Committee meetings are available from the Committee or the

Department. Committee meetings are open to the public and interested

persons may express their views at these meetings. The Department will

evaluate Committee recommendations and other available information to

determine whether modification of the assessment rate is needed.

Further rulemaking will be undertaken as necessary. The Committee's

1998-99 budget and those for subsequent fiscal periods 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.

[[Page 54555]]

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 2,000 producers of oranges and grapefruit

in the production area and 17 handlers subject to regulation under the

marketing order. Small agricultural producers have been defined by the

Small Business Administration (SBA) (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. The majority of orange and grapefruit producers and

handlers may be classified as small entities.

Last year, 4 of the handlers each shipped over 833,000 \7/10\

bushel cartons of oranges and grapefruit, which at an average free-on-

board (f.o.b.) price of $6.00, generated approximately $5 million in

gross sales. These handlers would be considered large businesses under

SBA's definition, and the remaining 13 handlers would be considered

small businesses. Of the approximately 2,000 producers within the

production area, few have sufficient acreage to generate sales in

excess of $500,000; therefore, a majority of producers of Texas oranges

and grapefruit may be classified as small entities.

This rule continues to decrease the assessment rate established for

the Committee and collected from handlers for the 1998-99 and

subsequent fiscal periods from $0.125 to $0.11 per \7/10\ bushel carton

handled. The Committee unanimously recommended 1998-99 expenditures of

$1,181,950 and an assessment rate of $0.11 per \7/10\ bushel carton.

The assessment rate of $0.11 is $0.015 lower than the 1997-98 rate. As

mentioned earlier, the quantity of assessable oranges and grapefruit

for the 1998-99 season is estimated at 9.5 million cartons. Income

derived from handler assessments, along with interest income and funds

from the Committee's authorized reserve, will be adequate to cover

budgeted expenses.

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

fiscal period include $768,700 for advertising and promotion and

$179,000 for the Mexican Fruit Fly support program. Budgeted expenses

for these items in 1997-98 were $712,000 and $170,000, respectively.

Budget increases for 1998-99 (with the 1997-98 budgeted amounts in

parentheses) include administrative at $68,313 ($64,548), and

compliance at $73,369 ($71,112). A new budget item for 1998-99 includes

funds totaling $14,000 for promotion program evaluation.

Many producers are still recovering from the devastating freezes of

1983 and 1989 that virtually destroyed the Texas citrus industry. Most

trees in the production area were planted within the past ten years and

have not yet reached full maturity. As a result, yields are still

somewhat low and profit to the producers is marginal. Also, a general

oversupply of citrus from other domestic sources and foreign countries

is depressing prices. To allow more of the revenue from sales to be

retained by those paying assessments, the Committee recommended that

the 1998-99 rate of assessment be reduced to $0.11 per \7/10\ bushel

carton. The reduction in the assessment rate will, however, cause the

Committee to draw approximately $131,950 from reserves to meet the

1998-99 budget. At the end of the 1998-99 fiscal period, the reserve is

expected to be $117,428. Interest income totaling $5,000 also will be

used to cover program expenses in 1998-99.

The Committee reviewed and unanimously recommended 1998-99

expenditures of $1,172,950, which included increases in administrative

costs, compliance, the advertising and promotion program, and the

addition of funds to cover a promotion program evaluation. Budgeted

expenses for the Mexican Fruit Fly program were left the same as last

year. In a subsequent meeting on August 18, 1998, however, the

Committee approved a $9,000 increase for the Mexican Fruit Fly program,

which increased the total budget to $1,181,950. In arriving at the

budget, the Committee considered information from various sources. A

lower assessment rate was considered. The Committee, however, concluded

that establishing a lower rate would require it to use too much of its

reserve. Based on its estimate of anticipated 1998-99 shipments, the

Committee concluded that an assessment rate of $0.11 per \7/10\ bushel

carton of oranges and grapefruit would generate the income necessary to

administer the program with an appropriate reserve level. Funds in the

reserve will be kept within the maximum permitted by the order

(approximately one fiscal period's expenses; Sec. 906.35).

A review of historical information and preliminary information

pertaining to the upcoming fiscal period indicates that the f.o.b.

price for the 1998-99 season could range between $4.50 and $9.00 per

\7/10\ bushel carton of oranges and grapefruit, depending upon the

fruit variety, size, and quality. Therefore, the estimated assessment

revenue for the 1998-99 fiscal period as a percentage of the total

pack-out revenue could range between 2.4 and 1.2 percent.

This action continues to decrease the assessment obligation imposed

on handlers. Assessments are applied uniformly on all handlers, and

some of the costs may be passed on to producers. However, decreasing

the assessment rate reduces the burden on handlers, and may reduce the

burden on producers. In addition, the Committee's meeting was widely

publicized throughout the Texas orange and grapefruit industry and all

interested persons were invited to attend the meeting and participate

in Committee deliberations on all issues. Like all Committee meetings,

the June 10 and August 18, 1998, meetings were public meetings and all

entities, both large and small, were able to express views on this

issue.

This action imposes no additional reporting or recordkeeping

requirements on either small or large Texas orange and grapefruit

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.

An interim final rule concerning this action was published in the

Federal Register on July 24, 1998 (63 FR 39697). Copies of that rule

were also mailed or sent via facsimile to all Texas orange and

grapefruit handlers. Finally, the interim final rule was made available

through the Internet by the Office of the Federal Register. A 60-day

comment period was provided for interested persons to respond to the

interim final rule. The comment period ended on September 22, 1998, and

no comments were received.

After consideration of all relevant material presented, including

the information and recommendation submitted by the Committee 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.

List of Subjects in 7 CFR Part 906

Marketing agreements, Grapefruit, Oranges, Reporting and

recordkeeping requirements.

[[Page 54556]]

PART 906--ORANGES AND GRAPEFRUIT GROWN IN LOWER RIO GRANDE VALLEY

IN TEXAS

Accordingly, the interim final rule amending 7 CFR part 906 which

was published at 63 FR 39697 on July 24, 1998, is adopted as a final

rule without change.

Dated: October 6, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-27311 Filed 10-9-98; 8:45 am]

BILLING CODE 3410-02-P