Almonds Grown in California; Revisions to Requirements Regarding Credit for Promotion and Advertising Activities

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV99-981-2 FR]

Almonds Grown in California; Revisions to Requirements Regarding

Credit for Promotion and Advertising Activities

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule revises the requirements regarding credit for

promotion and advertising activities prescribed under the

administrative rules and regulations of the California almond marketing

order (order). The order regulates the handling of almonds grown in

California and is administered locally by the Almond Board of

[[Page 41024]]

California (Board). The order is funded through the collection of

assessments from almond handlers. Under the terms of the order's

regulations, handlers may receive credit towards their assessment

obligation for certain expenditures for marketing promotion activities,

including paid advertising. This rule revises the requirements

regarding the activities for which handlers may receive such credit.

The changes make the promotion program more effective and efficient,

clarify the regulations, and improve program administration.

EFFECTIVE DATE: This final rule becomes effective August 1, 1999.

FOR FURTHER INFORMATION CONTACT: Martin Engeler, Assistant Regional

Manager, California Marketing Field Office, Marketing Order

Administration Branch, F&V, AMS, USDA, 2202 Monterey Street, suite

102B, Fresno, California 93721; telephone: (559) 487-5901, Fax: (559)

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) 720-5698. Small businesses may request information

on complying with this regulation, or obtain a guide on complying with

fruit, vegetable, and specialty crop marketing agreements and orders by

contacting Jay Guerber, Marketing Order Administration Branch, Fruit

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

Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202) 720-

5698, or E-mail: Jay.G[email protected]. You may view the marketing

agreement and order small business compliance guide at the following

web site: http://www.ams.usda.gov/fv/moab.html.

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 final rule has been reviewed under Executive Order 12988,

Civil Justice Reform. This rule 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 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. A 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 final rule revises the requirements regarding credit for

promotion and advertising activities prescribed under the

administrative rules and regulations of the order. The order is funded

through the collection of assessments from almond handlers. Under the

terms of the order's regulations, handlers may receive credit towards

their assessment obligation for certain expenditures for marketing

promotion activities, including paid advertising. This rule revises the

requirements regarding the activities for which handlers may receive

such credit. It provides for more effective promotion programs and

improved clarity to the regulations, resulting in improved program

administration and more efficient and effective use of industry

promotion funds. This rule was unanimously recommended by the Board at

meetings on December 2, 1998, and March 5, 1999.

The order provides authority for the Board to incur expenses for

administering the order and to collect assessments from handlers to

cover these expenses. Section 981.41(a) provides authority for the

Board to conduct marketing promotion projects, including projects

involving paid advertising. Section 989.41(c) allows the Board to

credit a handler's assessment obligation with all or a portion of his

or her direct expenditures for marketing promotion, including paid

advertising, that promotes the sale of almonds, almond products, or

their uses. Section 981.41(e) allows the Board to prescribe rules and

regulations regarding such credit for market promotion, including paid

advertising activities. Those regulations are prescribed in

Sec. 981.441. The Board recommended the following changes to those

regulations. These changes apply only to promotional activities

conducted during the 1999-2000 and future crop years.

Revising Time Frames for Submitting Documentation

Section 981.441(a) provides that, in order for handlers to receive

credit against their assessment obligation for their own promotional

expenditures, the Board must determine that such expenditures meet

applicable requirements. Currently, credit may be granted in the form

of a payment from the Board, or as an offset to the Board's assessment

if activities are conducted and documented to the satisfaction of the

Board at least 2 weeks prior to assessment billings. This 2-week period

is also currently specified in Sec. 981.441(b) and 981.441(e)(6)(ii).

Assessments are typically billed in four installments for a crop year

near the end of the following months--November, January, April, and

August.

Based on past experience with the program, the majority of handlers

file claims for credit for their promotional activities during the

later months of a crop year. The vast majority of claims are thus

received at the Board's office near the third and fourth filing

deadlines. Because of this, the Board's staff has found that it needs

more time to review and process handler documentation for promotional

claims submitted during this time to grant credit against handlers'

assessment obligations at the time assessment notices are issued. Thus,

the Board recommended that, in order for handlers to receive credit for

their promotional activities on their third and fourth assessment

billings (April and August), the documentation for such activities must

be submitted to the Board 3 weeks, rather than 2 weeks, prior to those

billings. However, this requirement should not apply to documentation

submitted prior to the fourth assessment billing for activities

conducted during the 1998-99 crop year. Handlers conducted activities

and operated under program parameters in place throughout the 1998-99

crop year. They should be allowed to continue to follow those

parameters for activities conducted during the 1998-99 crop year. Thus,

the two week timeframe should apply to submission of documentation

prior to the fourth assessment billing of the 1998-99 crop year.

Appropriate changes are made to paragraphs (a), (b), and (e)(6)(ii) of

Sec. 981.441.

Section 981.441(e)(6)(iv) currently provides that final claims for

credit-back advertising be submitted to the Board within 105 days after

the close of the crop year, in situations when handlers

[[Page 41025]]

have filed a statement of credit-back commitments outstanding as of the

close of the crop year. The Board recommended changing this 105-day

time frame for several reasons. First, the deadline can cause confusion

among handlers because it overlaps with the time frame for filing the

first claims of the new crop year. In addition, the overlap creates

program administration problems for Board staff with regard to

reviewing claims and applying credit for two separate years during the

same time period. Finally, the current deadline causes a delay in

completion of the Board's year-end accounting practices and annual

financial audit. Thus, the Board recommended that this deadline be

reduced from 105 to 76 days after the close of the end of the crop

year. This will eliminate confusion and program administration problems

associated with the overlap period for filing claims, and allow the

Board's end-of-year financial audit to be completed by December or

earlier of the following crop year, as opposed to January or later.

However, for reasons discussed in the preceding paragraph, the deadline

should remain at 105 days for activities conducted during the 1998-99

crop year. Section 981.441(e)(6)(iv) is modified accordingly.

When handlers have not filed a statement of credit-back commitments

outstanding at the close of a crop year, the deadline for filing final

promotional claims with the Board is 2 weeks prior to the final

assessment notice (mid-August). However, this deadline date is not

clearly specified in the current regulations and has caused some

confusion in the past. Therefore, the Board recommended establishing

August 15 as the deadline for filing final claims in this situation.

This will provide more clarity and reduce confusion regarding the

deadline for filing final claims. Section 981.441(e)(6)(iv) is modified

accordingly.

Redefining Growing Region

Section 981.441(e)(3) currently does not generally allow handlers

to receive credit against their assessment obligation for outdoor

advertising or sponsorships that are conducted in the major growing

regions of California. The major growing regions currently listed in

the regulation are the following 11 almond-growing counties: Butte,

Colusa, Fresno, Glenn, Kern, Madera, Merced, Sacramento, San Joaquin,

Stanislaus, and Tulare counties. The rationale for this exclusion is

that historically, much of the outdoor advertising and sponsorship

activities in the major growing areas have been to encourage growers to

do business with specific handlers rather than encouraging consumption

of almonds. This is contrary to the intent of this program, which is to

promote the sale, consumption, or use of almonds.

The Board recommended removing this list of counties from the

regulations and adding substitute language. Production and new acreage

planted in the almond industry have increased significantly in recent

years, and production areas have been shifting within the State. The

current regulations do not take this into account, and the

aforementioned list of counties no longer accurately reflects the major

growing areas.

The Board believes a more effective approach will be to revise the

regulations to specify that no credit be given for outdoor advertising

activities conducted in any California county with more than 1,000

bearing acres of almonds. This approach will adequately define the

major growing regions, and accommodate production shifts in the future.

This, in effect, removes Sacramento County as a major growing area and

thus allows outdoor advertising in that county. Sacramento County

contains a major metropolitan area, which lends itself to the use of

outdoor advertising, and is a minor almond growing area, with only 110

acres compared to an industry total of over 400,000 acres. The other 10

counties listed above continue to be regions ineligible for this type

of credit. Other counties with significant almond acreage such as

Kings, San Luis Obispo, Solano, Sutter, Tehama, Yolo, and Yuba are

classified as major almond growing areas, and outdoor advertising in

those counties, thus, will be considered ineligible for credit-back.

The Board further believes that modifying the regulations in this

manner will better reflect the original intent of the regulation, and

allow more flexibility for shifts in production within the growing

area. Section 981.441(e)(3) is modified accordingly. The Board also

recommended that sponsorship be completely eliminated as a credit-back

activity; this recommendation is discussed below.

Revisions to List of Credit-Back Activities

Section 981.441(e)(4)(ii) lists 13 other market promotion

activities for which credit may be granted. These activities currently

include marketing research (except pre-testing and test-marketing of

paid advertising); trade and consumer product publicity; printing costs

for promotional material; direct mail printing and distribution; retail

in-store demonstrations; point-of-sale materials (not including

packaging); sales and marketing presentation kits; trade fairs and

exhibits; trade seminars; 50/50 advertising with retailers; couponing

(printing, distribution, and handling costs only); purchase of Board-

produced promotional materials; and sponsorships.

The Board recommended revising the requirements regarding trade and

consumer product publicity. Trade and consumer product publicity

includes disseminating information through various communications media

to attract public attention. Handlers often hire an outside agency to

conduct such activities. Usually, such an agency charges a fee for its

work. In the past, this agency fee has been included as part of the

credit-back activity, as agency fees for paid advertising are. However,

in the case of trade and consumer product publicity, the Board has

encountered difficulties in associating agency fees to particular

credit-back activities, and determining whether this fee is

appropriate, because there is no standard fee or guidelines for such

fees. For paid advertising, this does not pose a problem because there

is a standard agency fee that can easily be associated directly to a

particular activity. Thus, the Board recommended that agency fees for

publicity no longer be included as a credit-back activity. All of the

other allowable activities associated with publicity (such as

materials) which can be directly tied to a specific publicity campaign

will still be eligible for credit.

The Board also recommended that trade seminars be removed from this

list of credit-back activities. Trade seminars include special events

designed to educate the trade about the almond industry and its

products. Although Board records indicate there has been no use of this

area as a credit-back activity by handlers, the Board believes that

there is a high possibility of misuse in this area. Trade seminars are

not well defined and standardized activities; thus, lavish

entertainment or elaborate sales meetings are characterized as trade

seminars. Trade shows will remain as a credit-back activity, however.

These events are widely used and the activities are well-defined and

standardized, such as setting up booths to exhibit merchandise to

customers. Thus, the Board recommended that trade seminars be removed

from the list of credit-back activities.

The Board also recommended that handlers' purchases of Board-

produced promotional materials be removed from the list of credit-back

activities. Board funds are used to develop various

[[Page 41026]]

promotional materials that are made available to handlers. In the past,

handlers purchased such materials from the Board and received promotion

credit. However, the Board has recently developed an allocation system

whereby handlers may receive a certain percentage of promotional

material produced by the Board free of charge. Each handler's

allocation for a crop year is based on the percentage of almonds

handled during the prior year. Handlers may purchase additional

material at cost. This new system, not covered by the credit-back

regulations, allows Board staff to plan more effectively and to

purchase materials more cost effectively, while maintaining a

promotional tool for handlers. Since this new system was developed, the

Board determined that continuing to allow credit for purchase of Board-

produced promotional material results in overlap of two similar

programs. Therefore, the Board recommended that purchase of such

material be removed from the list of credit-back activities.

In addition, the Board recommended that sponsorship be removed from

the list of credit-back activities. Sponsorship includes the financial

support of an event or person carried out by another group or person.

Sponsorship can be targeted towards consumers, the trade, or may be

undertaken for general goodwill. A review of sponsorship claims

submitted in the past indicates several claims appear to fall into the

category of general goodwill rather than to promote the sale and

consumption of almonds as the primary purpose. Further, Board staff has

had difficulty in determining a reasonable rate for crediting some of

the activities due to a lack of an industry standard. Finally, Board

staff has found that many of the most effective activities typically

claimed as sponsorship can be applicable under other credit-back areas

in the regulations. Thus, the Board recommended that sponsorship be

removed from the list of credit-back activities.

The Board also recommended that a new credit-back activity be added

to the regulations concerning use of the Internet. Several handlers

have or are developing web-sites to promote their almonds. This is a

rapidly developing communication medium becoming widely recognized as a

valuable promotional tool. Thus, the Board believes handlers should be

allowed credit for development and use of the Internet for promotional

purposes. Because of the vast array of uses of the Internet, however,

the Board believes guidelines should be implemented regarding crediting

handlers' expenditures in this area. Thus, the Board recommended that

handlers be allowed up to $5,000 credit against their assessment

obligation for the development and use of a web-site on the Internet

for advertising and public relations purposes. No credit is given for

costs regarding E-commerce (which is equivalent to opening a store),

Extranet (private web sites within the Internet), or portions of a web-

site that target the farming or grower trade. The Board believes these

types of activities lend themselves to potential abuses and do not

necessarily advance the intent of the program, which is to promote the

sale, use, and consumption of almonds.

Appropriate changes have been made to the list of credit-back

activities specified in Sec. 981.441(e)(4)(ii) to incorporate all of

these changes.

Recommendation Regarding Credit-Back for Almond Products

Section 981.441(a) specifies that handlers may be granted credit

against their assessment obligation for an amount not to exceed 66\2/3\

percent of a handler's proven expenditures for qualified activities.

Section 981.441(e)(iv) provides that when products containing almonds

are promoted, the amount allowed for credit-back shall reflect that

portion of the product weight represented by almonds, or the handler's

actual payment, whichever is less. For example, if a handler paid

$1,000 in advertising costs to promote a product which contained 60

percent almonds by weight, such handler is able to file a claim for

credit against his or her assessment obligation of 60 percent of

$1,000, or $600. The amount of credit is 66\2/3\ percent of $600, or

$400. If the product contained 70 percent almonds by weight, the

handler is eligible to receive a credit against his or her assessment

of 66\2/3\ percent of the 70 percent, or $467.

The Board recommended adding an exception to this portion of the

regulations. Specifically, handlers who own almond-containing

``unique'' or ``non-traditional'' products would be allowed to request

that the Board grant them a one-year exemption from this ``percentage

rule.'' Thus, in the above example, a handler could request from the

Board an exemption and receive credit for 66\2/3\ percent of his or her

advertising costs for the product, or $667, regardless of the weight of

the almonds in the product. The Board believes that this special

exception would provide handlers incentive to produce and advertise

unique almond products, resulting in increased almond sales for the

industry. Board members would be responsible for reviewing such

requests from handlers and determining whether an exception would be

granted on a case-by-case basis.

The Department has concerns with this recommendation. Although

there was support for this concept at the industry meetings which led

to the recommendations, those participating in the meetings were not

able to develop criteria to define a ``unique'' or ``non-traditional''

product. Thus, there are no specific parameters for Board staff to

review claims against. Because of this, the recommendation calls for

the Board itself, rather than staff, to determine what products would

qualify (Board staff currently reviews all promotion claims). It is

unclear how the Board would make such determinations. The lack of

criteria could potentially lead to subjective decision-making and Board

members reviewing claims could create potential conflicts of interest.

The purpose of these regulations is to provide a clear set of

guidelines that can be applied uniformly by Board staff to avoid these

situations. While the Department supports the concept of providing

incentive for new product development, it is not proceeding with this

recommendation at this time because of the aforementioned concerns.

Final Regulatory Flexibility Analysis

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 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 105 handlers of California almonds who are

subject to regulation under the order and approximately 6,000 almond

producers in the regulated area. Small agricultural service firms have

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

those having annual receipts of less than $5,000,000, and small

agricultural producers are defined as those having annual receipts of

less than $500,000.

Based on the most current data available, about 54 percent of the

handlers ship under $5,000,000 worth

[[Page 41027]]

of almonds and 46 percent ship over $5,000,000 worth on an annual

basis. In addition, based on acreage, production, and grower prices

reported by the National Agricultural Statistics Service, and the total

number of almond growers, the average annual grower revenue is

approximately $195,000. 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 final rule revises Sec. 981.441 of the order's administrative

rules and regulations regarding credit-back promotion and advertising.

Under the terms of the regulations, handlers may receive credit towards

their assessment obligation for certain of their direct expenditures

for marketing promotion activities, including paid advertising. This

rule makes several revisions to the requirements regarding the

activities for which handlers may receive such credit. These revisions

include: Revising the time frames and clarifying deadlines for when

handlers must submit documentation to the Board on activities

conducted; redefining the growing region eligible for credit for

certain types of outdoor advertising; revising the list of creditable

activities by eliminating credit for fees charged by advertising and

public relations agencies for publicity, trade seminars, purchase of

Board-produced promotional material, and sponsorships; and adding use

of the Internet as a promotional tool as a new, credit-back activity.

Regarding the impact of this rule on affected entities, the changes

specified herein are designed to provide for a more effective and

efficient use of the industry's advertising and promotion funds, and to

improve program administration. Requiring handlers to submit

documentation to the Board 3 weeks, as opposed to 2 weeks, prior to the

Board's April and August assessment billings changes the timing, but

not the frequency, of the filings submitted by handlers. This change is

not expected to increase the reporting burden on handlers, but rather

provide the Board's staff sufficient time to review the material and

credit handlers' accounts in a more timely manner. Clarifying the

deadline for filing claims at the end of a crop year will eliminate

confusion among handlers and allow the Board to complete its year-end

accounting practices more timely. Redefining the growing region

eligible for credit for outdoor advertising to include only counties

with less than 1,000 bearing acres of almonds will help ensure that

credit only be given for outdoor advertising that encourages consumers

to buy almonds (as opposed to such advertising done in larger bearing

counties directing growers to specific handlers). This change also adds

flexibility to the regulations to accommodate production shifts in the

future. Adding the Internet as a credit-back activity will allow

handlers to take advantage of a new communication medium and provide

them with a new promotional opportunity that can be used to offset a

portion of their assessment obligation. Removing certain activities

available for credit-back is not expected to negatively impact

handlers, as numerous promotional activities remain for them to offset

a portion of their assessment obligation. The activities removed have

received little use in the past, and in some cases lend themselves to

potential abuses that result in ineffective use of promotional funds.

The changes are expected to be equally beneficial to all handlers who

conduct their own promotional activities and to the industry as a

whole.

Several alternatives to the changes were considered. The first

alternative in all cases was to leave the regulations as they currently

exist. However, this does not address the changes in the industry,

technology, or promotional practices. Nor does it address the

administrative inefficiencies and the potential program abuses that

have been identified. Alternatives to the recommendations concerning

removing certain activities from the list of credit-back activities

included leaving the activities in the regulations, with further

definition and clarification added. However, it was determined that

this would lead to increased regulations and guidelines, with no

assurance of solving the problems. In addition, most of the activities

being removed have been used very infrequently by handlers. The removal

of credit for purchase of Board-produced promotional materials was

replaced by an alternative system whereby handlers are provided a free

allocation of such materials, with the option of purchasing additional

materials at cost.

Regarding the changing of dates for submitting documents to the

Board, different dates were considered. However, it was determined that

the dates ultimately recommended allow the minimum amount of time

necessary for Board staff to review documents, apply credit to

handlers' assessment accounts, and to complete year-end accounting

practices in a timely manner. Alternatives to changing the growing

region definition included using a different acreage number as a

threshold to defining a producing county. However, the industry agreed

for purposes of the credit-back program, 1,000 acres was appropriate.

Another alternative considered was to remove the restriction of outdoor

advertising in almond growing counties, but that does not address the

problem of handlers advertising to growers.

It was determined that the changes herein are the best way to

address the situation at this time. These regulations were designed to

reflect the industry's practices, and these revisions are intended to

respond to an evolving marketplace and changing promotional practices.

Changes have been and will continue to be recommended based on industry

and program experiences.

This rule imposes no additional reporting or recordkeeping

requirements on either small or large almond handlers. In accordance

with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the

information collection requirements that are contained in this rule

have been previously approved by the Office of Management and Budget

(OMB) and have been assigned OMB No. 0581-0071. 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. Finally, the Department has not identified any

relevant Federal rules that duplicate, overlap or conflict with this

rule.

Additionally, the Board's meetings were widely publicized

throughout the almond industry and all interested persons were invited

to attend the meetings and participate in Board deliberations. Like all

Board meetings, the December 2, 1998, and March 5, 1999, meetings were

public meetings and all entities, both large and small, were able to

express their views on this issue. The Board itself is composed of 10

members, of which 5 are producers and 5 are handlers.

Also, the Board has a number of appointed committees to review

certain issues and make recommendations to the Board. The Board formed

a task force in July 1998 to review its credit-back advertising

program. The task force met periodically during the following months to

review the program and consider appropriate changes. The task force

presented its recommendations to the Board's Public Relations and

Advertising Committee on November 13, 1998, and that committee

presented its recommendations to the Board on December 2, 1998. The

March 5, 1999, meeting was held to finalize the Board's

recommendations. All of these meetings were open to the public, and

both large

[[Page 41028]]

and small entities were able to participate and express their views.

A proposed rule concerning this action was published in the Federal

Register on June 10, 1999 (64 FR 31153). Copies of the rule were mailed

to all Board members and almond handlers. The proposal was also made

available through the Internet by the Office of the Federal Register. A

30-day comment period was provided for interested persons to respond to

the proposal. The comment period ended July 12, 1999. No comments were

received.

The Department made some changes to the amendatory language as

stated in the proposed rule for clarity and conformity between

provisions. These changes include a change pertaining to the

development and use of web-sites on the Internet for advertising and

public relations purposes. The words ``for such activities'' were added

to the proviso in paragraph (e)(4)(ii)(K) of Sec. 981.441 to clarify

that handlers may be allowed up to $5,000 credit against their

assessment obligation for activities concerning web-sites and the

Internet. Another change conforms language in paragraph (b) of

Sec. 981.441 to be consistent with the change requiring handlers to

submit documentation to the Board three weeks prior to the third and

fourth assessment billings in order to offset a portion of the

assessment obligation. Language was added to paragraphs (a),

(e)(6)(ii), and (e)(6)(iv) to clarify that the changes do not apply to

promotional activities conducted prior to the 1999-2000 crop year.

After consideration of all relevant matter presented, including the

information and recommendation submitted by the Board 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.

It is further found that good cause exists for not postponing the

effective date of this rule until 30 days after publication in the

Federal Register (5 U.S.C. 553) because: (1) This rule should be in

effect by August 1, the beginning of the 1999-2000 crop year; (2) these

changes were unanimously recommended by the Board and interested

persons had an opportunity to provide input; (3) handlers are aware of

these changes which were recommended at public meetings; and (4) a 30-

day comment period was provided for in the proposed rule.

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 981.441 is amended by revising the second sentence in

paragraph (a), paragraphs (b), (e)(3), (e)(4)(ii), the first sentence

in paragraph (e)(6)(ii), and paragraph (e)(6)(iv) to read as follows:

Sec. 981.441 Credit for market promotion activities, including paid

advertising.

(a) * * * Credit will be granted either in the form of a payment

from the Board, or as an offset to that portion of the assessment if

activities are conducted and documented to the satisfaction of the

Board at least 2 weeks prior to the Board's first and second assessment

billings, and at least 3 weeks prior to the Board's third and fourth

assessment billings in a crop year: Provided, That promotional

activities conducted during the 1998-99 crop year must be conducted and

documented at least 2 weeks prior to the Board's fourth assessment

billing in order to receive credit in the form of a payment from the

Board, or as an offset to that portion of the assessment. * * *

(b) The portion of the handler assessment for which credit may be

received under this section will be billed, and is due and payable, at

the same time as the portion of the handler assessment used for the

Board's administrative expenses, unless the handler(s) conduct and

document activities at least 2 weeks prior to the first and second

assessment billings and 3 weeks prior to the third and fourth

assessment billings: Provided, That promotional activities conducted

during the 1998-99 crop year must be conducted and documented at least

2 weeks prior to the Board's fourth assessment billing in order to

receive credit. If the handler(s) conduct activities and submit

documentation according to applicable provisions in this section, their

advertising assessment obligation will be reduced according to the

amount of proven activities approved by the Board.

* * * * *

(e) * * *

(3) No Credit-Back will be given for advertising placed in

publications that target the farming or grower trade. No Credit-Back

shall be given for any outdoor advertising in California almond growing

counties with more than 1,000 bearing acres: Provided, That outdoor

advertising in these counties which specifically directs consumers to a

handler-operated outlet offering direct purchase of almonds will be

eligible for Credit-Back.

(4) * * *

(ii) Other market promotion activities. Credit-Back shall be

granted for market promotion other than paid advertising, for the

following activities:

(A) Marketing research (except pre-testing and test-marketing of

paid advertising);

(B) Trade and consumer product publicity: Provided, That no Credit-

Back shall be given for related fees charged by an advertising or

public relations agency;

(C) Printing costs for promotional material;

(D) Direct mail printing and distribution;

(E) Retail in-store demonstrations;

(F) Point-of-sale materials (not including packaging);

(G) Sales and marketing presentation kits;

(H) Trade fairs and exhibits;

(I) 50/50 advertising with retailers;

(J) Couponing (printing, distribution, and handling costs only);

and

(K) Development and use of web-site on the Internet for advertising

and public relations purposes: Provided, That Credit-Back shall be

limited to $5,000 per year for such activities, and no credit shall be

given for costs for E-commerce (mail ordering through the Internet),

Extranet (restricted web sites within the Internet), or portions of a

web-site that target the farming or grower trade.

* * * * *

(6) * * *

(ii) Handlers may receive credit against their assessment

obligation up to the advertising amount of the assessment installment

due: Provided, That handlers submit the required documentation for a

qualified activity at least 2 weeks prior to the mailing of the Board's

first and second assessment notices, and at least 3 weeks prior to the

mailing of the Board's third and fourth assessment notices in a crop

year: Provided further, That promotional activities conducted during

the 1998-99 crop year must be conducted and documented at least 2 weeks

prior to the mailing of the Board's fourth assessment notice in order

to receive credit. * * *

(iii) * * *

(iv) A statement of the Credit-Back commitments outstanding as of

the close of a crop year must be submitted in full to the Board within

15 days after the close of that crop year. Final claims

[[Page 41029]]

pertaining to such commitments outstanding must be submitted within 76

days after the close of that crop year: Provided, That for activities

conducted during the 1998-99 crop year, final claims pertaining to such

commitments outstanding must be submitted within 105 days after the

close of the crop year. All other final claims for which no statement

of Credit-Back commitments outstanding has been filed must be submitted

by August 15 of that calendar year.

* * * * *

Dated: July 22, 1999.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 99-19091 Filed 7-28-99; 8:45 am]

BILLING CODE 3410-02-U