Onions Grown in South Texas; Decreased Assessment Rate

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 959

[Docket No. FV98-959-1 FIR]

Onions Grown in South 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, an interim final rule which decreased the

assessment rate established for the South Texas Onion Committee

(Committee) under Marketing Order No. 959 for the 1997-98 and

subsequent fiscal periods. The Committee is responsible for local

administration of the marketing order which regulates the handling of

onions grown in South Texas. Authorization to assess Texas onion

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: May 4, 1998.

FOR FURTHER INFORMATION CONTACT: Cynthia Cavazos or Belinda G. Garza,

McAllen Marketing Field Office, Fruit and Vegetable Programs, AMS,

USDA, 1313 East Hackberry, McAllen, Texas 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 No. 143 and Order No. 959, both as amended (7 CFR part 959),

regulating the handling of onions grown in South 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 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, South Texas

onion 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

onions beginning August 1, 1997, 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 1997-98 and subsequent fiscal periods from $0.07

per 50-pound container or equivalent to $0.05 per 50-pound container or

equivalent.

The Texas onion 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

South Texas onions. They are familiar with the Committee's needs and

with the costs of 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 indefinitely

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, in a telephone vote, unanimously recommended 1997-98

administrative expenses of $100,000 for personnel, office, and the

travel portion of the compliance budget. These expenses were approved

in July 1997. The assessment rate and funding for research and

promotion projects, and the road guard station maintenance portion of

the compliance budget were to be recommended at a later Committee

meeting.

The Committee subsequently met on November 6, 1997, and unanimously

recommended 1997-98 expenditures of $245,000 and an assessment rate of

$0.05 per 50-pound container or equivalent of onions. In comparison,

last year's budgeted expenditures were $448,000. The assessment rate of

$0.05 is $0.02 less than the rate previously in effect. At the former

rate of $0.07 per 50-pound container or equivalent, the assessment

income would have exceeded anticipated expenses by about $35,000, and

the projected reserve of $220,000 on July 31, 1998, would have exceeded

the level the Committee believes to be adequate to administer the

program. The Committee voted to lower its assessment rate and use more

of the reserve to cover its expenses. The reduced assessment rate is

expected to bring assessment income closer to the amount necessary to

administer the program for the 1997-98 fiscal period.

Major expenses recommended by the Committee for the 1997-98 fiscal

period include $80,912 for personnel and administrative expenses,

$45,000 for compliance, $33,088 for promotion, and $86,000 for onion

breeding research. Budgeted expenses for these items in

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1996-97 were $80,000, $120,000, $150,000, and $98,000, respectively.

The assessment rate recommended by the Committee was derived by

dividing anticipated expenses by expected shipments of South Texas

onions. Onion shipments for the year are estimated at 4 million 50-

pound equivalents, which should provide $200,000 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 $185,000) will

be kept within the maximum permitted by the order (approximately two

fiscal periods' expenses; Sec. 959.43).

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

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 remainder of

the Committee's 1997-98 budget was approved November 24, 1997, 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 action 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 70 producers of South Texas onions in the

production area and approximately 38 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.

Since the interim final rule was issued, the Department received

additional information from the Committee on handlers and producers in

the South Texas onion industry. This information is summarized below.

Most of the handlers are vertically integrated corporations involved in

producing, shipping, and marketing onions. For the 1996-97 marketing

year, onions produced on 12,175 acres were shipped by the industry's 38

handlers. The average acreage and median acreage handled was 310 acres

and 177 acres, respectively. In terms of production value, total

revenues from the 38 handlers were estimated to be $23.6 million; with

average and median revenue being $620,000 and $146,000, respectively.

The industry is highly concentrated as the largest 8 handlers (largest

25 percent) controlled 62 percent of the acreage and 77 percent of

onion production.

The South Texas onion industry is characterized by producers and

handlers whose farming operations generally involve more than one

commodity, and whose income from farming operations is not exclusively

dependent on the production of onions. Alternative crops provide an

opportunity to utilize many of the same facilities and equipment not in

use when the onion production season is complete. For this reason,

typical onion producers and handlers either produce multiple crops of

alternate crops within a single year.

Based on the SBA's definition of small entities, the Committee

estimates that all the 38 handlers regulated by the order would be

considered small entities if only their spring onion revenues are

considered. However, revenues from other productive enterprises would

likely push a large number of these handlers above the $5,000,000

annual receipt threshold. All of the 70 producers may be classified as

small entities based on the SBA definition if only their revenue from

spring onions is considered. When revenue from all sources is

considered, a majority of the producers would not be considered small

entities because the income of many of the producers would exceed the

$500,000 figure.

This rule continues in effect the assessment rate of $0.05 per 50-

pound container or equivalent established for the Committee and

collected from handlers for the 1997-98 and subsequent fiscal periods.

The Committee unanimously recommended 1997-98 expenditures of $245,000

and an assessment rate of $0.05 per 50-pound container or equivalent of

onions. In comparison, last year's budgeted expenditures were $448,000.

The assessment rate of $0.05 is $0.02 less than the rate previously in

effect. At the former assessment rate of $0.07 per 50-pound container

or equivalent and an estimated 1998 onion production of 4 million 50-

pound equivalents, the projected reserve on July 31, 1998, would have

exceeded the level the Committee believes necessary to administer the

program. The Committee decided that an assessment rate of less than

$0.05 would not generate the income necessary to administer the program

with an adequate reserve.

Major expenses recommended by the Committee for the 1997-98 fiscal

period include $80,912 for personnel and administrative expenses,

$45,000 for compliance, $33,088 for promotion, and $86,000 for onion

breeding research. Budgeted expenses for these items in 1996-97 were

$80,000, $120,000, $150,000, and $98,000, respectively.

Onion shipments for the year are estimated at 4 million 50-pound

equivalents, which should provide $200,000 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 $185,000) will be

kept within the maximum permitted by the order (approximately two

fiscal periods' expenses; Sec. 959.43).

Recent price information indicates that the grower price for the

1997-98 marketing season will range between $7.00 and $12.00 per 50-

pound container or equivalent of onions. Therefore, the estimated

assessment revenue for the 1997-98 fiscal period as a percentage of

total grower revenue will range between .714 and .417 percent.

This rule continues to decrease the assessment obligation imposed

on handlers. While this rule imposes some additional costs on handlers,

the costs are 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 are

[[Page 16392]]

offset by the benefits derived by the operation of the marketing order.

In addition, the Committee's meeting was widely publicized throughout

the South Texas onion industry and all interested persons were invited

to attend the meeting and participate in Committee deliberations on all

issues. Like all Committee meetings, the November 6, 1997, meeting was

a public meeting 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 South Texas onion 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 December 30, 1997 (62 FR 67694). 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

March 2, 1998, and no comments were received.

After consideration of all relevant matter 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 959

Marketing agreements, Onions, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR part 959 is

amended as follows:

PART 959--ONIONS GROWN IN SOUTH TEXAS

Accordingly, the interim final rule amending 7 CFR part 959 which

was published at 62 FR 67694 on December 30, 1997, is adopted as a

final rule without change.

Dated: March 30, 1998.

Sharon Bomer Lauritsen,

Acting Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-8786 Filed 4-2-98; 8:45 am]

BILLING CODE 3410-02-P