Raisins Produced From Grapes Grown In California; Increase in Assessment Rate

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV99-989-2 IFR]

Raisins Produced From Grapes Grown In California; Increase in

Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule increases the assessment rate established under the

Federal marketing order for California raisins (order) from $5.00 to

$8.50 per ton for raisins acquired by handlers for the 1998-99 and

subsequent crop years. The order regulates the handling of raisins

produced from grapes grown in California and is administered locally by

the Raisin Administrative Committee (Committee). Authorization to

assess raisin handlers enables the Committee to incur expenses that are

reasonable and necessary to administer the program. The crop year runs

from August 1 through July 31. The 1998-99 crop is smaller than

initially estimated. Further, for this crop year, volume regulation

will only be applied to one minor varietal type of raisin. As a result,

some expenses paid by assessments will increase. The $5.00 per ton

assessment rate will not generate enough revenue to cover expenses. The

$8.50 per ton assessment rate will remain in effect indefinitely unless

modified, suspended, or terminated.

DATES: February 25, 1999. Comments which are received by April 26,

1999, will be considered prior to issuance of any final rule.

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) 720-5698; or E-mail:

[email protected]. All comments should reference the docket

number and the date and page number of this issue of the Federal

Register and will be made available for public inspection in the Office

of the Docket Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Marketing

Specialist, California Marketing Field Office, Fruit and Vegetable

Programs, 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, or 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__N__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

Agreement and Order No. 989 (7 CFR part 989), both as amended,

regulating the handling of raisins produced from grapes grown in

California, hereinafter referred to as the ``order.'' The 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

raisin handlers are subject to assessments. It is intended that the

assessment rate as issued herein will apply to all assessable raisins

beginning August 1, 1998, the beginning of the 1998-99 crop year, and

continue in effect 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. 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 in equity 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 under the order

for the 1998-99 and subsequent crop years from $5.00 to $8.50 per ton

of raisins acquired by handlers. Authorization to assess raisin

handlers enables the Committee to incur expenses that are reasonable

and necessary to administer the program. The 1998-99 crop is smaller

than initially estimated. Further, for this crop year, volume

regulation will be applied to one minor varietal type of raisin. As a

result, some expenses paid by assessments will increase. The $5.00 per

ton rate of assessment will not generate enough revenue to cover

expenses. This action was unanimously recommended by the Committee at a

meeting on January 15, 1999.

Sections 989.79 and 989.80, respectively, of the Federal order for

California raisins provide 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 California

raisins. They are familiar with the Committee's needs and with

[[Page 9054]]

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.

An assessment rate of $5.00 per ton for raisins acquired by

handlers has been in effect under the Federal order since the 1996-97

crop year (61 FR 52684; October 8, 1996). Regarding the 1998-99 crop

year, the Committee met on August 13, 1998, and recommended

administrative expenditures of $1,655,000 for the year. Major

administrative expenditures included $545,500 for export program

administration and related activities; $478,000 for salaries; and

$100,000 for compliance activities. These expenditures were approved by

the Department on August 18, 1998. At that time, the Committee

estimated the crop at about 321,400 tons, and anticipated that 333,000

tons of raisins would be acquired by handlers during the 1998-99 crop

year (included about 59,800 tons of 1997 reserve raisins sold to

handlers for free use). The $5.00 per ton assessment rate was expected

to generate $1,665,000 in revenue which would have allowed the

Committee to meet its administrative expenses.

Section 989.79 of the order also provides authority for the

Committee to formulate an annual budget of expenses likely to be

incurred during the crop year in connection with reserve raisins held

for the account of the Committee. A certain percentage of each year's

raisin crop may be held in a reserve pool during years when volume

regulation is implemented to help stabilize raisin supplies and prices.

The remaining ``free'' percentage may be sold by handlers to any

market. Reserve raisins are disposed of through various programs

authorized under the order. Reserve pool expenses are deducted from

proceeds obtained from the sale of reserve raisins. Net proceeds are

returned to the pool's equity holders, primarily producers.

At its August 1998 meeting, the Committee recommended a 1998-99

reserve pool budget of $2,941,500. Major pool expenses included

$1,050,000 for insurance and repair of bins for storing reserve

raisins; $545,500 for export program administration and related

activities; $462,000 for salaries; and $235,000 for compliance

activities.

Adverse crop conditions during the spring of 1998 created by the

weather phenomenon known as El Nino, combined with scattered rain and a

labor shortage during harvest contributed to a smaller 1998-99 raisin

crop than initially anticipated. Also, reserve pools were initially

established in October 1998 for five of the nine varietal types of

raisins covered under the order--Natural (sun-dried) Seedless

(Naturals), Zante Currants (Zantes), Dipped Seedless, Oleate and

Related Seedless, and Other Seedless--when the Committee computed and

announced preliminary free and reserve marketing percentages pursuant

to Sec. 989.54. In November 1998, the Committee determined that volume

regulation was not warranted for Dipped Seedless, Oleate and Related

Seedless, and Other Seedless raisins.

The Committee met on January 15, 1999, to review crop conditions,

its financial situation, and various marketing order programs. The

Committee reduced its production estimate from 321,000 to 276,500 tons,

and reduced its estimate of assessable tonnage from 333,000 to 315,000

tons. The Committee also determined that volume regulation was not

warranted for Naturals and all other varietal types, but is warranted

for Zantes, for the 1998-99 crop year. This is the first time in 16

years that volume regulation for Naturals has not been implemented.

With a smaller 1998 crop, reduced estimate of assessable tonnage,

and volume regulation only warranted for Zantes, the Committee

recommended revising its administrative and reserve pool budgets. The

1998 reserve pool budget was reduced from $2,941,500 to $25,000 which

should cover operating expenses for Zante reserve raisins. In addition,

$975,000 initially budgeted for 1998 reserve pool operating expenses

were applied to the existing 1997 Natural and Zante reserve pool

budgets. Included in the $975,000 is $683,000 which will be utilized

for export program administration.

The Committee also reviewed and identified those expenses that were

considered reasonable and appropriate to continue the raisin marketing

order program, without a significant reserve pool. The expenses that

were associated with the initial reserve pool budget were modified and

adjusted as appropriate and included in the administrative budget. For

example, salaries, payroll, taxes, retirement contributions, insurance,

rent for office space, telephone, and other administrative items are

usually split between the Committee's administrative and reserve

budgets. Although the 1998 crop is reduced, the Committee needs to

maintain its staff to administer the order and ongoing export programs.

Many operating expenses were adjusted from the Committee's initial

administrative and reserve budgets, such as for overall compliance

($335,000 to $200,000), overall auditing fees ($35,000 to $10,000),

overall printing ($20,000 to $17,000), and overall Committee meetings

($24,000 to $20,000). Ultimately, the Committee recommended increasing

its administrative expenses from $1,665,000 to $2,677,500, which

includes an additional $1,012,500 in operating expenses initially

associated with the 1998 reserve budget. Major expenses to be funded

through handler assessments now include $940,000 in salaries; $408,000

for export program administration; $200,000 for compliance activities;

$150,000 for Committee travel; and $140,000 for membership dues and

surveys.

The Committee recommended increasing its assessment rate from $5.00

to $8.50 per ton of raisins acquired by handlers. The $8.50 per ton

assessment rate when applied to anticipated acquisitions of 315,000

tons will yield $2,677,500 in assessment income which will be adequate

to cover anticipated administrative expenses. Authority for the

Committee to recommend an increase in the assessment rate during a crop

year to obtain sufficient funds to meet expenses is provided in

Sec. 989.80(c) of the order. Any unexpended assessment funds from the

crop year are required to be credited or refunded to the handlers from

whom collected, as provided in Sec. 989.81(a) of the order.

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 crop year 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 revised budget and those for

subsequent crop years will be reviewed and, as appropriate, approved by

the Department.

[[Page 9055]]

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 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 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 20 handlers of California raisins who are

subject to regulation under the order and approximately 4,500 raisin

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. No more than 7 handlers, and a majority of

producers, of California raisins may be classified as small entities.

Thirteen of the 20 handlers subject to regulation have annual sales

estimated to be at least $5,000,000, and the remaining 7 handlers have

sales less than $5,000,000, excluding receipts from any other sources.

This rule increases the assessment rate established under the

Federal order for the 1998-99 and subsequent crop years, as specified

in Sec. 989.347, from $5.00 to $8.50 per ton of raisins acquired by

handlers. The order regulates the handling of raisins produced from

grapes grown in California and is administered locally by the

Committee. Authorization to assess raisin handlers enables the

Committee to incur expenses that are reasonable and necessary to

administer the program. The 1998-99 crop is smaller than initially

estimated due to adverse weather conditions and a labor shortage during

harvest. Further, for this crop year, volume regulation will be applied

to one minor varietal type of raisin. As a result, some expenses paid

by assessments will increase. The $5.00 per ton rate of assessment will

not generate enough revenue to cover expenses.

With a smaller crop, reduced estimate of assessable tonnage, and

volume regulation only warranted for Zantes, the Committee recommended

revising its administrative and reserve pool budgets. The 1998 reserve

pool budget was reduced from $2,941,500 to $25,000 which should cover

operating expenses for Zante Currant reserve raisins. In addition,

$975,000 initially budgeted for 1998 reserve pool operating expenses

were applied to the existing 1997 Natural and Zante reserve pool

budgets. Included in the $975,000 is $683,000 which will be utilized

for export program administration.

The Committee also reviewed and identified those expenses that were

considered reasonable and appropriate to continue the raisin marketing

order program, without a significant reserve pool. Those expenses that

were associated with the initial reserve pool budget were modified and

adjusted as appropriate and included in the administrative budget. For

example, salaries, payroll taxes, retirement contributions, insurance,

rent for office, space, telephone, and other administrative items are

usually split between the Committee's administrative and reserve

budgets. Although the 1998 crop is reduced, the Committee needs to

maintain its staff to administer the order and ongoing export programs.

Many operating expenses were adjusted from the Committee's initial

administrative and reserve budgets. These included adjustments for

overall compliance ($335,000 to $200,000), overall auditing fees

($35,000 to $10,000), overall printing ($20,000 to $17,000), and

overall Committee meetings ($24,000 to $20,000). Ultimately, the

Committee recommended increasing its administrative expenses from

$1,665,000 to $2,677,500, which includes an additional $1,012,500 in

operating expenses initially associated with the 1998 reserve budget.

The $8.50 per ton assessment rate, when applied to anticipated

acquisitions of 315,000 tons, will yield $2,677,500 in revenue and

allow the Committee to meet expenses, which include $940,000 for

salaries; $408,000 for export program administration; $200,000 for

compliance activities; $150,000 for Committee travel; and $140,000 for

membership dues and surveys. Authority for the Committee to incur

expenses, generate revenue by assessing raisin handlers, and increase

the assessment rate during a crop year is provided in Secs. 989.79 and

989.80 of the order, respectively.

Regarding the impact of this rule on handlers and producers, 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. With the

1998-99 producer price for Naturals, the major raisin varietal type

covered under the order, averaging $1,290 per ton of raisins acquired,

estimated assessment revenue for the 1998-99 crop year as a percentage

of total producer revenue is expected to be less than 2 percent. The

increased assessment rate will allow the Committee to meet its expenses

and continue program operations. Any unexpended assessment funds from

the crop year are required to be credited or refunded to the handlers

from whom collected, as provided in Sec. 989.81(a) of the order.

The Committee considered some alternatives to the recommended

action. The Committee's Audit Subcommittee formed a working group which

held a meeting on December 16, 1998, to discuss revisions to the

budget. The Audit Subcommittee held a follow-up meeting on January 6,

1999. Alternatives discussed at these meetings were based on the

assumption that no volume regulation would be in effect for any

varietal type of California raisins for the remainder of the crop year.

Accordingly, one option considered was to have the 1998 administrative

budget absorb all of the operating costs that are typically split

between the administrative and reserve pool budgets, and increase the

assessment rate to $11.50 per ton of raisins acquired to cover these

costs. However, the majority of subcommittee members determined that

the increase in expenses should be funded more appropriately with 1998-

99 handler assessments and proceeds from the anticipated 1998 reserve

pool for Zantes, and the existing 1997 reserve pools for Naturals and

Zantes, respectively.

The working group and subcommittee members also considered various

scenarios regarding the itemized expenses, estimate of assessable

tonnage, and necessary assessment income. Ultimately, the Committee

determined that volume regulation will only be warranted for Zantes,

that administrative expenses should be increased to $2,677,500, that

the estimate of assessable tonnage should be reduced from 333,000 to

315,000 tons, and that the assessment rate should be increased to $8.50

per ton of raisins acquired by handlers.

This rule imposes no additional reporting or recordkeeping

requirements on either small or large raisin 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. Finally, the Department

[[Page 9056]]

has not identified any relevant Federal rules that duplicate, overlap

or conflict with this rule.

In addition, the Committee's working group meeting on December 16,

1998, subcommittee meeting on January 6, 1999, and the Committee

meeting on January 15, 1999, where this action was deliberated were

public meetings widely publicized throughout the raisin industry. All

interested persons were invited to attend the meetings and participate

in the industry's deliberations. Finally, all interested persons are

invited to submit information on the regulatory and informational

impacts of this action on small businesses.

After consideration of all relevant material presented, including

the Committee's recommendation, and other information, it is found that

this interim final rule, as hereinafter set forth, will tend to

effectuate the declared policy of the Act.

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

cause that it is impracticable, unnecessary, and contrary to the public

interest to give preliminary notice prior to putting this rule into

effect and that good cause exists for not postponing the effective date

of this rule until 30 days after publication in the Federal Register

because: (1) The Committee needs to begin assessing handlers at the

$8.50 rate as soon as possible to generate sufficient revenue to meet

its expenses; (2) the 1998-99 crop year began on August 1, 1998, and

the order requires that the rate of assessment for each crop year apply

to all raisins acquired during such crop year; (3) handlers are aware

of this action which was unanimously recommended by the Committee at a

public meeting and is similar to other assessment rate actions issued

in past years; and (4) this rule provides for a 60-day comment period,

and all comments timely received will be considered prior to

finalization of this rule.

List of Subjects in 7 CFR Part 989

Grapes, Marketing agreements, Raisins, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR part 989 is

amended as follows:

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 989 continues to read as

follows:

Authority: 7 U.S.C. 601-674.

2. Section 989.347 is revised to read as follows:

Sec. 989.347 Assessment rate.

On and after August 1, 1998, an assessment rate of $8.50 per ton is

established for assessable raisins produced from grapes grown in

California.

Dated: February 17, 1999.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 99-4540 Filed 2-23-99; 8:45 am]

BILLING CODE 3410-02-P