OPM published a document in the Federal Register of June 15, 2004, (69 FR 33277) providing guidance in the submission of requests for voluntary early retirement authority. Inadvertently, identical typographical errors occurred in two places within the document. This document is being issued to correct the errors.

This rule is issued under Marketing Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR part 905), regulating the handling of oranges, grapefruit, tangerines, and tangelos grown in Florida, 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 (USDA) is issuing this rule in conformance with Executive Order 12866.

This 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 USDA 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 USDA 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 USDA'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 exempts shipments of small quantities of tree run citrus free from the grade, size, and assessment requirements under the order. Tree run fruit is quality citrus picked and boxed in the field and taken directly to market without being graded or sized. By providing this exemption, producers can ship 150 1 3/5 bushel boxes per variety, per shipment, of their own citrus free from order regulations. Total shipments cannot exceed 3,000 boxes per variety, per season. The Committee believes this action may be a way to increase fresh market shipments, develop new markets, and improve grower returns. This action was recommended unanimously by the Committee at its meeting on June 15, 2004.

Section 905.80 of the order provides authority for the Committee to exempt certain types of shipments from regulation. Exemptions can be implemented for types of shipments of any variety in such minimum quantities, or for such purposes as the Committee, with the approval of USDA, may specify. No assessment is levied on fruit so shipped. The Committee shall, with the approval of USDA, prescribe such rules, regulations, or safeguards as it deems necessary to prevent varieties handled under the provisions of this section from entering channels of trade for other than the purposes authorized by this section.

Section 905.149 of the order's rules and regulations defines grower tree run citrus and outlines the procedures to be used for growers to apply to the Committee to ship their own tree run citrus exempt from grade, size, and assessment requirements. The provisions were originally established just for the 2002-03 season, then extended for the 2003-04 season. During the 2003-04 season, growers were allowed to ship a maximum of 150 1 3/5 bushel boxes per variety, per shipment, up to a seasonal total of 3,000 boxes per variety of their tree run fruit free from order requirements.

For the past two seasons, the Committee has utilized the provisions of § 905.149 on an annual basis. Rather than making this recommendation each year, the Committee recommended that the provisions of § 905.149 be established on a continuous basis. However, growers must receive approval from the Committee before they can utilize this exemption.

According to Florida Department of Citrus (FDOC) regulation 20-35.006, “Tree run grade is that grade of naturally occurring sound and wholesome citrus fruit which has not been separated either as to grade or size after severance from the tree.” Also, FDOC regulation 20-62.002 defines wholesomeness as fruit free from rot, decay, sponginess, unsoundness, leakage, staleness, or other conditions showing physical defects of the fruit. By definition, this fruit is handled by the grower and bypasses normal handler operations. Prior to implementation of the exemption, all tree run citrus had to meet all requirements of the marketing order, as well as State of Florida Statutes and Florida Department of Citrus regulations. Even with this rule, tree run citrus must continue to meet applicable State of Florida Statutes and Florida Department of Citrus regulations, including inspection and any container marking requirements. However, growers will be able to pick, box, and ship directly to buyers, and avoid the costs incurred when citrus is handled by packinghouses.

During the season prior to the utilization of § 905.149, small producers of Florida citrus expressed concerns about problems incurred when trying to sell their citrus. These concerns included increasing production costs, limited returns, and the availability of markets. For some growers, there is limited demand for the variety of citrus they produce or they do not produce much volume. Consequently, they have difficulty getting packinghouses to pack their fruit. These problems, along with market conditions, have driven a fair number of small citrus growers out of the citrus industry.

According to Florida Agricultural Statistics Service, from 1998-99 to 2002-03, fresh grapefruit sales have dropped 22 percent and fresh orange shipments are down 11 percent. This means fewer cartons are being packed. This can cause problems for varieties that may be out of favor with handlers and consumers, or for a particular variety of fruit where there may be a glut on the market. As a result, packinghouses do not wish to become over stocked with fruit which is difficult to market and, therefore, will not pack less popular minor varieties of fruit or fruit that is in oversupply. Packinghouses do not want to pack what they cannot sell. These factors have caused wholesome fruit to be shipped to processing plants or left on the tree.

When citrus cannot be sold into the fresh market, it can be sold to the processing plants. However, the prices received are considerably lower. During the last seven seasons, only the 1999-2000 season produced on-tree returns for processed grapefruit that exceeded one dollar per box. Over the period from 1998-99 through 2002-03, the differential between fresh prices and processed prices has averaged $4.43 per box for grapefruit and $2.20 per box for oranges. Hence, many growers would prefer to ship to the fresh market.

In addition, the costs associated with growing for the fresh market are greater than the costs for growing for the processed market. While the costs of growing for the fresh market have been increasing, in many cases the returns to the grower have been decreasing. The cost of picking, packing, hauling, and associated handling costs for fresh fruit is sometimes greater than the grower's return on the fruit. In some cases, where the cost of harvesting exceeds the returns to the grower or the grower cannot find a buyer for the fruit, economic abandonment can occur. According to information from the National Agricultural Statistics Service, the seasons of 1995-96, 1996-97, 1997-98, and 2000-01 had an average economic abandonment of two million boxes or more of red seedless grapefruit alone.

As a result, growers are looking for other outlets for their fruit in an effort to increase returns. Some growers believe secondary markets exist which are not currently being supplied that would provide additional outlets for their citrus. They think niche markets exist that could be profitable and want the opportunity to continue servicing them. They believe they can ship quality fruit directly to out-of-state markets and that it would be well received.

These growers contend tree run citrus does not need a minimum grade and size to be marketable, and that they can supply quality fruit to secondary markets not served by packed fruit. However, they believe they need to bypass normal handler operations and the associated costs for it to be profitable.

To address these concerns, the Committee recommended for the past two season that producers be allowed to ship small quantities of their own production directly to the market exempt from order requirements. The exemption was established on an annual basis for the 2002-03 season [68 FR 4361, January 29, 2003] and for the 2003-04 season [68 FR 68717, December 10, 2003]. The exemption for the 2003-04 season expired July 31, 2004.

The Committee recommended this exemption on a yearly basis for the past two seasons to determine its effect and how fruit shipped under the exemption was received on the market. The Committee was interested in whether markets existed that packed fruit was not supplying. They also wanted an indication of the number of growers interested in utilizing the exemption and the volume of citrus shipped under the exemption. In addition, the Committee wanted information regarding any compliance issues or any impact on competitive outlets.

During the 2003-04 season, 101 growers were approved to ship under the exemption. Approximately 40 growers actually used the exemption, shipping a total of nearly 16,000 1-3/5-bushel boxes of oranges, grapefruit, tangerines, and tangelos. This is an increase from 23 growers shipping approximately 4,500 boxes during the 2002-03 season. Those producers who took advantage of the exemption believe that the program was successful. They were able to sell their fruit and supply markets not already supplied by traditional packers. Growers also believe more markets exist. They think with time, they can identify additional markets. Thus, growers want to continue have the opportunity to supply these markets.

The Committee had agreed that following the 2003-04 season they would review the information provided by growers who applied for and used the tree run exemption to determine if the exemption should be continued. In the June 15, 2004, meeting, the Committee discussed this issue, and considered the impact and benefits of the exemption. The Committee also reviewed a letter in support of the exemption from Florida Citrus Mutual, a large grower organization.

The Committee believes that markets have been developed and that tree run fruit will continue to be sold primarily to non-competitive, niche markets, such as farmers' markets, flea markets, roadside stands, and similar outlets and will not compete with non-exempt fruit shipped under the order. Fruit is sold in similar markets within the state, and such markets have been successful. Continuing this exemption allows growers to sell directly to similar markets outside of the state, supplying markets that might not otherwise be supplied. The Committee believes this action will allow the industry to service more non-traditional markets and may be a way to increase fresh market shipments and to develop new markets. Consequently, the Committee voted unanimously to extend the tree run exemption on a continuous basis.

Growers will continue to be required to apply to the Committee, on the “Grower Tree Run Certificate Application” form provided by the Committee, for an exemption to ship tree run citrus fruit to interstate markets. On this form, the grower must provide their name; address; phone number; legal description of the grove; variety of citrus to be shipped; and the approximate number of boxes produced in the specified grove. The grower must also certify that the fruit to be shipped comes from the grove owned by the grower applicant. The application form will be submitted to the Committee manager and reviewed for completeness and accuracy. The manager will also verify the information provided. After the application has been reviewed, the manager will notify the grower applicant in writing whether the application is approved or denied.

Once the grower has received approval for their application for exemption and begins shipping fruit, a “Report of Shipments Under Grower Tree Run Certificate” form, also provided by the Committee, must be completed for each shipment. On this form, the grower will provide the location of the grove, the amount of fruit shipped, the shipping date, and the type of transportation used to ship the fruit, along with the vehicle license number. The grower must supply the Road Guard Station with a copy of the grower certificate report for each shipment, and provide a copy of the report to the Committee. This report will enable the Committee to maintain compliance. Failure to comply with these requirements may result in the cancellation of a grower's certificate.

This rule does not affect the provision that handlers may ship up to 15 standard packed cartons (12 bushels) of fruit per day exempt from regulatory requirements. Fruit shipped in gift packages that are individually addressed and not for resale, and fruit shipped for animal feed are also exempt from handling requirements under specific conditions. Also, fruit shipped to commercial processors for conversion into canned or frozen products or into a beverage base are not subject to the handling requirements under the order.

Section 8e of the Act requires that whenever grade, size, quality, or maturity requirements are in effect for certain commodities under a domestic marketing order, including citrus, imports of that commodity must meet the same or comparable requirements. This rule does not change the minimum grade and size requirements under the order. Therefore, no change is necessary in the citrus import regulations as a result of this action.

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 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 11,000 producers of Florida citrus in the production area and approximately 75 handlers subject to regulation under the marketing order. Small agricultural producers are defined by the Small Business Administration (SBA) as those having annual receipts of less than $750,000, and small agricultural service firms are defined as those whose annual receipts are less than $5,000,000 (13 CFR 121.201).

Based on industry and Committee data, the average annual f.o.b. price for fresh Florida oranges, grapefruit, tangerines, and tangelos during the 2003-04 season was approximately $8.69 per 4/5 bushel carton, and total fresh shipments for the 2003-04 season where around 52 million cartons of oranges, grapefruit, tangerines, and tangelos. Twenty handlers handled approximately 66 percent of Florida's citrus shipments in 2003-04. Considering the average f.o.b. price, at least 55 percent of the orange, grapefruit, tangerine, and tangelo handlers could be considered small businesses under SBA's definition. Therefore, the majority of Florida citrus handlers may be classified as small entities. The majority of Florida citrus producers may also be classified as small entities.

This rule establishes the provisions of § 905.149 of the rules and regulations on a continuous basis. This rule exempts shipments of small quantities of tree run citrus from the grade, size, and assessment requirements under the order. Growers must receive approval from the Committee before they can use this exemption. The Committee believes this action may be a way to increase fresh market shipments, develop new markets, and improve grower returns. Authority for this action is provided in § 905.80(e).

According to a study by the University of Florida—Institute of Food and Agricultural Sciences, production costs for the 2001-02 season ranged from $1.71 per box for processed oranges to $2.41 per box for grapefruit grown for the fresh market. The average packing charge for oranges is approximately $6.50 per box, for grapefruit the charge is approximately $5.75 per box, and for tangerines the charge can be as high as $9 per box. Sending fruit to a packinghouse can be cost prohibitive, especially for the small grower. This rule may provide an additional outlet for fruit that might otherwise be forced into the processing market or left on the tree altogether. For the 2003-04 season, this exemption accounted for additional fresh shipments totaling over 32,000 cartons.

This rule will not impose any additional costs on the grower. It will have the opposite effect of providing growers the opportunity to reduce the costs associated with having fruit handled by a packinghouse. This action will allow growers to ship small quantities of their tree run citrus directly into interstate commerce exempt from the order's grade, size, and assessment requirements and their related costs. With this action, growers will be able to reduce handling costs and use those savings toward developing additional markets not serviced by the traditional packinghouses. This regulation will help growers by providing another outlet for their fruit. This will benefit all growers regardless of size, but it is expected to have a particular benefit for small growers who need additional revenue to meet operating costs.

The Committee considered one alternative to this action. The possible alternative was to not continue the exemption. However, the Committee believes the exemption provides other possible outlets for fruit and may help increase returns to growers. Therefore, this alternative was rejected.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the information collection requirements contained in this rule have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0189. USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule. 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 Committee's meeting was widely publicized throughout the citrus industry and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the June 15, 2004, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue. Interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html . Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

This rule invites comments on exempting small-quantity shipments of tree run citrus free from grade, size, and assessment requirements under the order. Any comments received will be considered prior to finalization of this rule.

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 good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register . This rule needs to be in place before September 20, 2004, to cover as many shipments during the 2004-05 season as possible. Also, growers can begin making plans on how to utilize the exemption. In addition, growers and handlers are aware of this rule, which was recommended at a public meeting. Also, a 60-day comment period is provided for in this rule and any comments received will be considered prior to finalization.

This rule is issued under Marketing Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR part 905), regulating the handling of oranges, grapefruit, tangerines, and tangelos grown in Florida, 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 (USDA) is issuing this rule in conformance with Executive Order 12866.

This 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 USDA 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 USDA 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 USDA'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 limits the volume of small red seedless grapefruit entering the fresh market. This rule restricts the volume of sizes 48 and 56 fresh red seedless grapefruit shipped during the first 22 weeks of the 2004-05 season by establishing a weekly percentage for each week, beginning September 20, 2004. This rule supplies enough small red seedless grapefruit, without saturating all markets with these small sizes. This action should help stabilize the market and improve grower returns.

A typical season runs from September through June. It can run longer if there is a strong demand for fresh grapefruit. During the first 22 weeks of a typical season there is an oversupply of small red seedless grapefruit and a reduced demand for such fruit. Later in the season, there is a greater demand for smaller sizes. As discussed later in more detail, this action is intended to stabilize the early season (22-week) supply of small red seedless grapefruit and to help improve the prices received by producers. In the absence of this action, producer prices may be lower than their cost of production.

Section 905.52 of the order provides authority to limit shipments of any grade or size, or both, of any variety of Florida citrus. Such limitations may restrict the shipment of a portion of a specified grade or size of a variety. Under such a limitation, the quantity of such grade or size a handler may ship during a particular week is established as a percentage of the total shipments of such variety shipped by that handler during a prior period, established by the Committee and approved by USDA.

Section 905.153 of the regulations provides procedures for limiting the volume of small red seedless grapefruit entering the fresh market. The procedures specify that the Committee may recommend that only a certain percentage of sizes 48 and 56 red seedless grapefruit be made available for shipment into fresh market channels for any week or weeks during the regulatory period. The regulation period is 22 weeks long and begins the third Monday in September. Under such a limitation, the quantity of sizes 48 and 56 red seedless grapefruit that may be shipped by a handler during a regulated week is calculated using the recommended percentage. In past seasons, handlers could calculate the total volume of sizes 48 and 56 they could ship in a regulated week by taking the recommended weekly percentage times the average weekly volume of red seedless grapefruit handled by such handler in the previous five seasons. However, under a separate interim final rule, USDA is changing the number of seasons used to determine a handler's average week from the five previous seasons to the three previous seasons. This interim final rule also appears in this issue of the Federal Register .

This interim final rule limits the volume of sizes 48 (3-9/16 inches minimum diameter) and 56 (3-5/16 inches minimum diameter) red seedless grapefruit entering the fresh market by instituting weekly percentages for the first 22 weeks of the 2004-05 season. This rule establishes weekly percentages at 45 percent for the first three weeks (September 20, 2004 through October 10, 2004), 36 percent for weeks 4 through 18 (October 11, 2004 through January 23, 2005), 40 percent for weeks 19 and 20 (January 23, 2005 through February 6, 2005), and 45 percent for weeks 21 and 22 (February 7, 2005 through February 20, 2005). The Committee recommended this action unanimously at a meeting on June 15, 2004. This action is similar to those taken the previous seven seasons.

The Committee believes that the over shipment of smaller-sized red seedless grapefruit has a detrimental effect on the market. While there is a market for small-sized red seedless grapefruit, the availability of large quantities oversupplies the fresh market with these sizes and negatively impacts the market for all sizes. These smaller sizes, 48 and 56, normally return the lowest prices when compared to the other larger sizes. However, when there is too much volume of the smaller sizes available, the overabundance of small-sized fruit pulls the prices down for all sizes.

For the three seasons prior to the use of percentage size regulation, 1994-95, 1995-96, and 1996-97, returns for red seedless grapefruit had been declining, often not returning the cost of production. On-tree prices for red seedless grapefruit had fallen steadily from $6.87 per box (1 3/5 bushel) during the 1991-92 season, to $3.38 per box during the 1993-94 season, to $1.91 per box during the 1996-97 season.

An economic study done by the University of Florida—Institute of Food and Agricultural Sciences in May 1997, found that on-tree prices had fallen from a high near $7.00 per carton in 1991-92 to around $1.50 per carton for the 1996-97 season. The study projected that if the industry elected to make no changes, the on-tree price would remain around $1.50 per carton. The study also indicated that increasing minimum size restrictions could help raise returns.

The Committee believes that the over shipment of smaller-sized red seedless grapefruit contributed to these poor returns for growers and to lower prices. Based on available statistical information, Committee members concluded that once shipments of sizes 48 and 56 reached levels above 250,000 cartons per week, prices declined on those and most other sizes of red seedless grapefruit. The Committee believed if shipments of small sizes were maintained at around or below 250,000 cartons a week, prices would stabilize and demand for the larger, more profitable sizes would increase. Consequently, in 1996, the Committee recommended changing their rules and regulations to establish the procedures in § 905.153 to limit the volume of small red seedless grapefruit entering the market. The Committee has successfully used the provisions of § 905.153 to address the problems associated with the over shipment of small red seedless grapefruit, recommending percentage of size regulation during the first 11 weeks of the 1997-98, 1998-99, 1999-2000, and 2000-01 seasons, and for the first 22 weeks of the 2001-02, 2002-03, and the 2003-04 seasons. Under percentage of size regulation, prices increased and movement stabilized when compared to seasons without regulation. Examples of these positive changes follow.

The Committee believes that for the 2004-05 season small-sized red seedless grapefruit would again negatively impact the market for all grapefruit if not regulated. By regulating the volume of small sizes entering the fresh market for the first 22 weeks of the season, shipments of sizes 48 and 56 can be maintained near the 250,000-carton level. To address the volume of small-sized red seedless grapefruit available and to prevent the over shipment of small sizes, the Committee voted to utilize the provisions of § 905.153 and establish percentage of size regulation for each week of the 22 week regulatory period for the 2004-05 season.

In making its recommendation, the Committee considered the success of previous percentage of size regulations and their experience from past seasons. At the meeting, the Committee referenced the results of a study commissioned to determine the merit of percentage of size regulation. The study completed by Robert E. Barber, Jr., Director of Economics, Florida Citrus Mutual, entitled “An Econometric Spatial Equilibrium Analysis of the 48/56 Red Grapefruit Rule,” dated July 1, 2003, evaluated the effectiveness of past percentage of size regulations.

One of the Committee's goals in establishing percentage of size regulation was to stabilize prices and increase returns. The Committee believes percentage of size regulation has been effective in this area, and the study shows this to be true. The study estimates that percentage of size regulation has increased total f.o.b. revenues for red grapefruit by a total of 12 percent or $18.9 million over the six-year period from 1997-98 to 2002-03, averaging $3.15 million per season. Each of the six seasons had an increase in f.o.b. revenues ranging from a low of $2.52 million during the 1999-2000 season to a high of $3.73 million for the 2002-03 season. The f.o.b. prices per carton are also estimated to have increased by an average of 17 percent or $1.00 per carton during this six-year period.

In the three seasons prior to the first percentage of size regulation in 1997-98, prices of red seedless grapefruit fell from a weighted average f.o.b. price of $7.80 per carton in October to a weighted average f.o.b. price of $5.50 per carton in December. In the seven seasons utilizing percentage of size regulation, red seedless grapefruit maintained higher prices throughout the season with a weighted average f.o.b. price of $8.26 per carton in October, $7.12 per carton in December, and remained at around $7.09 in April. Average prices for the season have also been higher during seasons with percentage of size regulation. The average season price for red seedless grapefruit was $7.10 for the last seven years compared to $5.83 for the three years prior to using percentage of size regulation. The Barber study shows that prices for the seasons 1997-98 to 2002-03 would have been from around $0.72 to $1.00 lower per carton without regulation.

On-tree prices for fresh red seedless grapefruit have also been higher during seasons with percentage of size regulation than for the three seasons prior to regulation. The average on-tree price for fresh red seedless grapefruit was $4.86 for the seasons 1998-99 through 2002-03 with percentage of size regulation compared to $3.08 for the three years prior to regulation.

The University of Florida, Citrus Research and Education Center published an estimated cost of production for grapefruit for the 2002-2003 season. The cost to produce grapefruit for the fresh market was estimated at $1,072.54 per acre for the Indian River area, the major grapefruit production area in Florida. Indian River grapefruit production ranges from 325 boxes per acre to 525 boxes per acre and has averaged around 417 boxes per acre. Based on the cost of production, and the average boxes per acre, growers need to earn a total on-tree value (fruit going both to the fresh market and to processing) of approximately $2.55 per box in order to break even. For the three seasons prior to percentage of size regulation, the total on-tree value averaged $1.78 per box. Comparatively, for the seasons with regulation, 1998-99 through 2002-03, the on-tree value has averaged $2.63 per box for red grapefruit, which is just above the estimated $2.55 per box break-even level.

Small growers have struggled the last ten seasons to receive returns near the cost of production. For many, the higher on-tree returns produced under percentage of size regulation have meant the difference between profit and loss.

Another of the Committee's goals in establishing percentage of size regulation was to help maintain the price differential between the prices for larger sizes and those for smaller sizes. At the start of the season, larger-sized fruit command a premium price. The f.o.b. price can be $4 to $10 more a carton than for the smaller sizes. For 2003-04, the f.o.b. price for a size 27 averaged $12.38 per carton in October 2003. This compares to an average f.o.b. price of around $6.38 per carton for a size 56 during the same period. In the three years before the issuance of a percentage size regulation, the f.o.b. price for large sizes dropped to within $1 or $2 of the f.o.b. price for small sizes by the middle of the season due to the oversupply of the smaller sizes.

Percentage of size regulation has helped sustain the price differential, maintaining higher prices for the larger-sized fruit. During the three years before regulation, the average differential between the carton price for a size 27 and a size 56 was $3.47 at the end of October and dropped to $1.68 by mid-December. In the seven years with percentage of size regulation, the average differential between the carton price for a size 27 and a size 56 was $5.51 at the end of October, $3.83 in mid-December, and remained at around $3.36 the first week in May.

The Barber study also states that f.o.b. revenues for larger sized red grapefruit benefited substantially from percentage of size regulation. Of the $18.9 million increase in total fresh f.o.b. revenues for red grapefruit the last six seasons, nearly $16.7 million can be attributed to gains made by fruit larger than sizes 48 and 56.

According to the Economic Analysis and Program Planning Branch, USDA, the margins between the prices for the various sizes of red grapefruit have remained fairly constant throughout the seasons covered under percentage of size regulation. However, if the domestic market becomes glutted with too many small-sized grapefruit (48 and 56), these margins would be negatively impacted and total grower returns would be reduced.

The goal of this percentage of size rule is to reduce the volume of the least valuable fruit in the market and strengthen grower prices and revenues. Without this rule, the fresh grapefruit market will become glutted with small-sized fruit, which will have a negative impact on prices for larger-sized fruit and grower returns. Absent this rule, the price margins between sizes (23, 27, 32, 36, 40, 48, and 56) will diminish and ultimately result in lower grower returns. This rule is intended to fully supply all markets for small sizes with fresh red seedless grapefruit size 48 and 56, while avoiding oversupplying these markets to the detriment of grower revenues.

The Committee believes percentage of size regulation has also helped stabilize the volume of small sizes entering the fresh market. During deliberations in past seasons, Committee members concluded once shipments of sizes 48 and 56 reached levels above 250,000 cartons per week, prices declined on those and most other sizes of red seedless grapefruit. The last seven seasons during the weeks regulated by a percentage of size regulation, weekly shipment of sizes 48 and 56 red seedless grapefruit remained near or below 250,000 cartons for nearly 80 percent of the regulated weeks. Also, based on the Barber study, while percentage of size regulation has been successful in controlling the volume of small sizes entering the fresh market, it has had only a limited affect on total shipments.

In addition, an economic study by Florida Citrus Mutual (Lakeland, Florida) dated April 1998, also found that the weekly percentage regulation was effective. The study stated that part of the strength in early season pricing appeared to be due to the use of the weekly percentage rule to limit the volume of sizes 48 and 56. It said prices were generally higher across the size spectrum with sizes 48 and 56 having the largest gains, and larger-sized grapefruit also registering modest improvements. The rule shifted the size distribution toward the higher-priced, larger-sized grapefruit, which helped raise average f.o.b. prices. It further stated that sizes 48 and 56 accounted for only 17 percent of domestic shipments during the same period in the 1997-98 season, as small sizes were used to supply export customers with preferences for small-sized grapefruit.

In addition to the success of past regulations, there are other circumstances warranting the consideration of establishing percentage of size regulation. For the four seasons, 1999-2000, 2000-01, 2001-02, and 2002-03 the percentage of the remaining crop represented by small sizes in February averaged around 45 percent. This compares to an average of 31 percent for the same month for seasons 1995-96 through 1997-98. These five seasons, 1999-2000 through 2003-04, averaged a greater percentage of smaller sizes across each month, October through February, than over the three seasons 1995-96 through 1997-98. For the seven seasons prior to the 2002-03 season there has been a movement toward an increased volume of small sizes as a percentage of the overall crop. For the 2002-03 season, grapefruit sized larger than in the previous seasons and small sizes were not as dominant a factor. However, the 2003-04 season red grapefruit produced a greater number of sizes 48 and 56 red grapefruit than anticipated. The September official measurement of red seedless grapefruit indicated that 91 pieces of grapefruit were required for a box. The November measurements indicated that it would take 100 pieces of grapefruit to make a box. Currently, it is unclear how the 2004-05 crop will size. It is possible that the 2004-05 crop may produce the volume of small sizes represented in the majority of past seasons, making an even greater supply of small-sized fruit available for market.

European and Asian markets also impact the volume of small sizes available. These markets have shown a strong demand for the smaller-sized red seedless grapefruit. The increase in the value of currency in these markets compared to the dollar resulted in more shipments of smaller-sized red seedless grapefruit to these markets. However, a reduction in shipments to these areas could occur during the coming season if market conditions change. This could result in a greater amount of small sizes for remaining markets to absorb.

The market for processed grapefruit is also a consideration. Approximately 45 percent of red seedless grapefruit was used for processing in 2002-03, with the majority being squeezed for juice. However, this outlet offers limited returns and is currently not profitable. Of the last seven years, only 1999-2000 produced on-tree returns for processed red seedless grapefruit exceeding $1 per box. Returns for 2002-03 processed red seedless grapefruit averaged a negative $0.68 per box. When on-tree returns for processed grapefruit drop below a dollar, there is pressure to shift a larger volume of the overall crop to the fresh market to benefit from the higher prices normally paid for fresh fruit. From 1998 through 2003, the differential between fresh prices and processed prices has averaged $4.43 per box. Consequently, growers prefer to ship grapefruit to the fresh market.

Statistics from the Florida Department of Citrus show there is currently a 42-week inventory of red seedless grapefruit juice from last season. By the start of the season, it is projected that over 36 weeks worth of juice will remain in inventory. Due to current inventories, on-tree prices for processed red seedless grapefruit for the 2004-05 season will most likely mirror prices from past seasons and remain below a dollar. A fair percentage of red seedless grapefruit shipped for processing are smaller sizes. With limited returns for processed grapefruit, an additional volume of small sizes could be shifted toward the fresh market, further aggravating problems with excessive volumes of small sizes.

Further, red seedless grapefruit production continues to exceed demand. This has contributed to the low returns and led to economic abandonment. According to information from the National Agricultural Statistics Service, the seasons of 1995-96, 1996-97, 1997-98, 2000-01, and 2001-02 had an average economic abandonment of two million boxes or more of red seedless grapefruit. Data available for the 2002-03 season is preliminary, however, it is likely some economic abandonment did occur.

Economic abandonment and prices falling below the cost of production support the use of percentage of size regulation to control the volume of small sizes. The percentage of size regulation has a positive impact on price and is intended to make the most economically viable fruit available to the fresh market without oversupplying small-sized fruit. The above considerations further support the need to control the volume of sizes 48 and 56 during the season to prevent small sizes from overwhelming all markets.

The Committee believes the volume of small red seedless grapefruit available will have a detrimental effect on the market if it is not controlled. Members believe establishing weekly percentages during the last seven seasons has been effective and that problems successfully addressed by percentage of size regulation will return without regulation. Consequently, the Committee believes weekly percentage of size regulation should be established for each of the 22 weeks of the regulatory period for the 2004-05 season. The Committee recommended establishing weekly percentages at 45 percent for the first three weeks, 36 percent for weeks 4 through 18, 40 percent for weeks 19 and 20, and 45 percent for weeks 21 and 22.

The Committee considered the percentages set last year as a basis for discussing percentages for the 2004-05 season. They believe the percentages set last year worked well, and decided to make their initial recommendation for each of the 22 weeks at similar levels. There was a need to increase percentages in the final weeks of regulation for 2003-04. Consequently, the committee recommended increased percentages for the last few weeks in 2004-05 in the event the same conditions occur. Committee members believed setting last season's percentages higher than the most restrictive level allowed of 25 percent had worked well, providing some restriction while affording volume for those markets that prefer small sizes.

Committee members believe if shipments of small sizes are maintained at around or below 250,000 cartons a week, prices stabilize and demand for larger, more profitable sizes increases. The Committee considered the 250,000-carton level when recommending the weekly percentages. The first three weeks are set at 45 percent because it is likely there will only be a limited volume shipped. In the last five seasons, total shipments of red seedless grapefruit have only exceeded 250,000 cartons once in the first three weeks of the season.

Setting weekly percentages at 36 percent for the majority of weeks provides a total allotment of 249,294 cartons (36 percent of the total industry base of 653,424 cartons) per week. This will help hold shipments of sizes 48 and 56 red seedless grapefruit near the 250,000-carton level for the greater part of the season. The increase to 40 percent for weeks 19 and 20 and 45 percent for weeks 21 and 22 offers a little more allotment, provides some transition to the period without regulation and helps to prevent the dumping of small sizes following the end of regulation. The Committee believes these percentages provide some flexibility while holding weekly shipments of sizes 48 and 56 close to the 250,000-carton mark.

More information helpful in determining the appropriate weekly percentages will be available after August. At the time of the June meeting, grapefruit had just begun to size, giving little indication as to the distribution of sizes. Only the most preliminary of crop estimates was available, with the official estimate not to be issued until October. Further, the first reports on how the crop is sizing will not be available until after September. Consequently, the Committee believes it is best to set regulation at these levels, and then relax the percentages later in the season if conditions warrant.

The Committee recognized they could meet again during the regulation period, as needed, and use the most current information to consider adjustments in the weekly percentage rates. This will help the Committee make the most informed decisions as to whether the established percentages are appropriate. Any changes to the weekly percentages set by this rule will require additional rulemaking and the approval of USDA.

Therefore, this rule establishes weekly percentages at 45 percent for the first three weeks, 36 percent for weeks 4 through 18, 40 percent for weeks 19 and 20, and 45 percent for weeks 21 and 22. This rule is intended to fully supply all markets for small sizes with fresh red seedless grapefruit sizes 48 and 56, while avoiding oversupplying these markets to the detriment of grower revenues. The Committee plans to meet as needed during the 22-week period to ensure weekly percentages are at the appropriate levels.

Under § 905.153, the quantity of sizes 48 and 56 red seedless grapefruit a handler may ship during a regulated week is calculated using the set weekly percentage. Handlers can fill their allotment with size 56, size 48, or a combination of the two sizes such that the total of these shipments is within the established limits. The Committee staff performs the specified calculations and provides them to each handler. The regulatory period begins the third Monday in September, September 20, 2004. Each regulation week begins Monday at 12 a.m. and ends at 11:59 p.m. the following Sunday.

Section 905.153(d) provides the allowances for overshipments, loans, and transfers of allotment. These tolerances allow handlers the opportunity to supply their markets while limiting the impact of small sizes.

The Committee can also act on behalf of handlers wanting to arrange allotment loans or participate in the transfer of allotment. Repayment of an allotment loan is at the discretion of the handlers party to the loan. The Committee will inform each handler of the quantity of sizes 48 and 56 red seedless grapefruit they can handle during a particular week, making the necessary adjustments for overshipments and loan repayments.

Section 8e of the Act requires that whenever grade, size, quality, or maturity requirements are in effect for certain commodities under a domestic marketing order, including grapefruit, imports of that commodity must meet the same or comparable requirements. This rule does not change the minimum grade and size requirements under the order, only the percentages of sizes 48 and 56 red grapefruit that may be handled. Therefore, no change is necessary in the grapefruit import regulations as a result of this action.

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 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 75 grapefruit handlers subject to regulation under the order and approximately 11,000 growers of citrus in the regulated area. Small agricultural service firms, including handlers, are defined by the Small Business Administration (SBA) 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 $750,000 (13 CFR 121.201).

Based on industry and Committee data, the average annual f.o.b. price for fresh Florida red seedless grapefruit during the 2003-04 season was approximately $7.58 per 4/5 -bushel carton, and total fresh shipments for the 2003-04 season are estimated at 24.7 million cartons of red grapefruit. Approximately 25 percent of all handlers handled 75 percent of Florida's grapefruit shipments. Using the average f.o.b. price, at least 80 percent of the grapefruit handlers could be considered small businesses under SBA's definition. Therefore, the majority of Florida grapefruit handlers may be classified as small entities. The majority of Florida grapefruit producers may also be classified as small entities.

The over shipment of small-sized red seedless grapefruit contributes to poor returns and lower on-tree values due to the production of red seedless grapefruit in excess of demand. This rule limits the volume of sizes 48 and 56 red seedless grapefruit shipped during the first 22 weeks of the 2004-05 season by establishing weekly percentages for each of the 22 weeks, beginning September 20, 2004. This rule sets the weekly percentages at 45 percent for weeks 1, 2, and 3, 36 percent for week 4 through week 18, and at 40 percent for weeks 19 and 20, and 45 percent for weeks 21 and 22. The quantity of sizes 48 and 56 red seedless grapefruit that may be shipped by a handler during a particular week is calculated using the percentages set. This action supplies enough small red seedless grapefruit, without saturating all markets with small sizes. This action will help stabilize the market and improve grower returns. This rule uses the provisions of § 905.153. Authority for this action is provided in § 905.52 of the order. The Committee unanimously recommended this action at a meeting on June 15, 2004.

While the establishment of volume regulation may necessitate additional spot picking, which could entail slightly higher harvesting costs, in most cases this is already a standard industry practice. The Barber study indicates spot picking would only fractionally increase harvesting costs on just a small segment of the boxes picked. In addition, with spot picking, the persons harvesting the fruit are more selective and pick only the desired sizes and qualities. This reduces the amount of time and effort needed in sorting fruit, because undersized fruit is not harvested. This may result in a cost savings through reduced processing and packing costs. In addition, because this regulation is only in effect for part of the season, the overall effect on costs is minimal. Consequently, this rule is not expected to appreciably increase costs to producers.

If a 25 percent restriction on small sizes had been applied during the 22-week period for the three seasons prior to the 1997-98 season, an estimated average of 3.1 percent of overall shipments during that period would have been constrained by regulation. A large percentage of this volume most likely could have been replaced by larger sizes for which there are no volume restrictions. Under regulation, larger sizes have been substituted for smaller sizes with a nominal effect on overall shipments.

In addition, handlers can transfer, borrow or loan allotment based on their needs in a given week. Handlers also have the option of over shipping their allotment by 10 percent in a week, provided the over shipment is deducted from the following week's shipments. Approximately 314 loans and transfers were utilized last season. Statistics for 2003-04 show that, in only 3 weeks of the regulated period was the total available allotment used. Therefore, with the weekly percentages for the 2004-05 season set at approximately the same levels as last season, the overall impact of this regulation on total shipments should be minimal.

The Committee believes establishing percentage of size regulation during the 2004-05 season will have benefits similar to those realized under past regulations. Handlers and producers have received higher returns under percentage of size regulation than without regulation. In the three seasons prior to the first percentage of size regulation in 1997-98, prices of red seedless grapefruit fell from a weighted average f.o.b. price of $7.80 per carton in October to a weighted average f.o.b. price of $5.50 per carton in December. In the seven seasons utilizing percentage of size regulation, red seedless grapefruit maintained higher prices throughout the season with a weighted average f.o.b. price of $8.26 per carton in October, to an average f.o.b. price of $7.12 per carton in December, and remained at around $7.09 in April. Average prices for the season have also been higher during seasons with percentage of size regulation. The average season price for red seedless grapefruit was $7.10 for the last seven years compared to $5.83 for the three prior years to using the percentage of size regulation. The Barber study estimates that prices for the seasons 1997-98 to 2002-03 would have been from around $0.72 to $1.00 lower per carton without regulation.

On-tree earnings per box for fresh red seedless grapefruit have also improved under regulation, providing better returns to growers. The average on-tree price for fresh red seedless grapefruit was $4.86 for the seasons 1998-99 through 2002-03 with percentage of size regulation, compared to $3.08 for the three years prior to regulation. Small growers have struggled the last nine seasons to receive returns near the cost of production. For many, the higher returns provided by percentage of size regulation meant the difference between profit and loss.

Shipments during the 22 weeks covered by this regulation account for nearly 60 percent of the total volume of red seedless grapefruit shipped to the fresh market. Considering this volume and the very limited returns from grapefruit for processing, it is imperative that returns from the fresh market be maximized during this period. Even a small increase in price when coupled with the volume shipped represents a significant increase in the overall return to growers.

The Barber study estimates that prices rose anywhere from 12.9 percent or $.72 to 17.5 percent or $1.00 per 4/5 -bushel carton during percentage of size regulation. Even if this action were only successful in raising returns by $.10 per carton, this increase in combination with the substantial number of shipments generally made during this 22-week period, would represent an increased return of nearly $1.4 million. Consequently, any increased returns generated by this action should more than offset any additional costs associated with this regulation.

The purpose of this rule is to help stabilize the market and improve grower returns. Percentage of size regulation is intended to reduce the volume of the least valuable fruit in the market, and shift it to those markets that prefer small sizes. This regulation helps the industry address marketing problems by keeping small sizes (sizes 48 and 56) more in balance with market demand without glutting the fresh market with these sizes.

This rule provides a supply of small-sized red seedless grapefruit sufficient to meet market demand, without saturating all markets with these small sizes. This action is not expected to decrease the overall consumption of red seedless grapefruit. With supply in excess of demand, this rule is not expected to impact consumer prices or demand. The benefits of this rule are expected to be available to all red seedless grapefruit growers and handlers regardless of their size of operation. This rule will likely help small under-capitalized growers who need additional weekly revenues to meet operating costs.

The Committee considered several alternatives when discussing this action. The Committee discussed recommending percentages for only the first few weeks and meeting in the fall to recommend the percentages for the remaining weeks. This option was rejected as most members wished to know their volumes for the entire season. The Committee also believes its recommendations on percentages for all 22 weeks have been effective. The Committee also discussed setting higher percentages for the last few weeks of regulation. The Committee agreed that the percentages would be reexamined when more complete data was available and changed if necessary. The Red Grapefruit subcommittee would meet during the 2004-05 season to examine the rule and the percentages, and could recommend adjustments at that time. Therefore, this alternative was also rejected.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the information collection requirements contained in this rule have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0189. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sectors.

USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule. However, red seedless grapefruit must meet the requirements as specified in the U.S. Standards for Grades of Florida Grapefruit (7 CFR 51.760 through 51.784) issued under the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 through 1627).

The Committee's meeting was widely publicized throughout the citrus 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 15, 2004, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. Interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

This rule invites comments on limiting the volume of small red seedless grapefruit entering the fresh market during the first 22 weeks of the 2004-05 season. Any comments received will be considered prior to finalization of this rule.

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) This rule needs to be in place when the regulatory period begins September 20, 2004, and handlers need to consider their allotment and how best to service their customers; (2) the industry has been discussing this issue for some time, and the Committee has kept the industry well informed; (3) this action has been widely discussed at various industry and association meetings, and interested persons have had time to determine and express their positions; (4) this action is similar to those recommended in previous seasons; and (5) this rule provides a 30-day comment period and any comments received will be considered prior to finalization of this rule. A comment period of 30 days is appropriate because it will allow for any needed intra-seasonal changes to be made in a timely manner.

This rule is issued under Marketing Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR part 905), regulating the handling of oranges, grapefruit, tangerines, and tangelos grown in Florida, 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 (USDA) is issuing this rule in conformance with Executive Order 12866.

This 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 USDA 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 USDA 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 USDA'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 changes the procedures used to limit the volume of sizes 48 and 56 red seedless grapefruit entering the fresh market. This rule changes the way a handler's average week is calculated for when quantities of small red seedless grapefruit are regulated by adjusting the prior period used from five preceding seasons to three preceding seasons. This action also changes provisions governing overshipments. This rule makes the regulation more responsive to industry needs and better allocates base quantities. The committee unanimously recommended these changes at a meeting held on June 15, 2004.

In a separate action, USDA is issuing an interim final rule establishing percentages for each week of the 22-week regulatory period for the 2004-05 shipping season. This rule also appears in this issue of the Federal Register.

Section 905.52 of the order provides authority to limit shipments of any grade or size, or both, of any variety of Florida citrus. Such limitations may restrict the shipment of a portion of a specified grade or size of a variety. Under such a limitation, the quantity of such grade or size a handler may ship during a particular week would be established as a percentage of the total shipments of such variety by such handler in a prior period, established by the committee and approved by USDA.

Section 905.153 of the regulations specifies procedures for limiting the volume of small red seedless grapefruit entering the fresh market. Currently, this section defines the prior period as required by § 905.52 as an average week within the immediately preceding five seasons. An average week is calculated for each handler. This section specifies that the Committee may recommend only a certain percentage of sizes 48 and 56 red seedless grapefruit be made available for fresh shipment for any week or weeks during the regulatory period. Under such a limitation, the quantity of sizes 48 and 56 red seedless grapefruit that a handler may ship is calculated by taking the recommended percentage times the handler's average week. Section 905.153 also details overshipment provisions specifying that any handler may ship an amount of sizes 48 and 56 red seedless grapefruit up to 10 percent greater than their allotted volume each week. The quantity of such overshipment is deducted from the handler's allotment for the following week. Overshipments are not permitted during week 22, which now is the final regulatory week.

This rule amends § 905.153 by revising the definition of prior period and the language governing overshipments. This rule changes the number of preceding seasons used to calculate a handler's average week from five preceding seasons to three preceding seasons. This rule also changes the provisions regarding overshipments by redefining when overshipments are permitted.

Section 905.52 specifies that whenever any size limitation restricts the shipment of a portion of a specified size, the quantity each handler may ship during a particular week shall be based on a prior period recommended by the committee and approved by USDA. When the committee recommended the procedures in § 905.153 to limit the volume of small red seedless grapefruit entering the fresh market during the regulated period (61 FR 69011, December 31, 1996), they determined an average week within the preceding five seasons would be the prior period used to calculate a handler's base quantity for each week of regulation.

Currently, an average week is calculated by adding the total red seedless grapefruit shipments by a handler during the 33-week period beginning the third Monday in September for the preceding five seasons. This total is divided by five to establish an average season. This average season is then divided by the 33 weeks in a season to derive the average week. When the committee utilizes these provisions and establishes percentages for the regulatory period, a handler's average week is multiplied by the applicable percentage to establish that handler's base quantity for shipping small red seedless grapefruit during that particular week.

The committee initially chose to use the past five seasons to calculate an average season, because it thought that the five-year period helped adjust for variations in growing conditions between the seasons. At the time, the committee believed using five seasons provided the most accurate picture of an average season and by using the average season to calculate an average week, provided each handler with an equitable base from which to establish shipments.

However, since these procedures were established, there have been many changes in the industry. Some handlers have increased their volume of red seedless grapefruit shipments, while others have decreased their shipments or stopped shipping grapefruit altogether.

Because of the continuing changes in the industry, the committee believes that using the past five seasons no longer provides the most accurate picture of an average season. At its June 15, 2004, meeting, the committee discussed the prior period, and unanimously recommended changing from a five-season average to a three-season average when calculating a handler's average week. The committee believes that this adjustment in the prior period will better reflect changes in the industry, and better allocate the base quantities for all handlers of red seedless grapefruit.

The committee further believes that the use of a three-season average will be more responsive in reallocating base than the current five-season average. Under a five-season average, it can be several seasons before changes in shipping volume are reflected in the allotment a handler receives. With a five-season average, handlers that have decided to limit their grapefruit business receive more allotment than they need for several seasons even though this allotment could be better utilized by handlers that are increasing their market for red seedless grapefruit. The committee believes that this change better allocates allotment by increasing the base for handlers that have increased their red grapefruit shipments and by reducing the base for handlers that have reduced their red grapefruit shipments.

Consequently, the committee also believes that this change will reduce the need for loans and transfers by shifting additional base to those with increasing shipments. Currently, handlers who are increasing their volume of red seedless grapefruit shipments often need additional allotment to meet their market demands and rely on the provisions in § 905.153 that provide for allotment loans and transfers. Under these provisions, a handler may borrow allotment from another handler or allotments can be transferred from one handler to another. These procedures provide a means for handlers who have increased their volume of red seedless grapefruit shipments to meet the demands of the market and their buyers.

However, handlers do not know how much allotment other handlers have or if the allotment will be used. The committee believes that this change from a five to a three-year average in computing base quantities better reflects the needs of the industry and lessens the need for loans and transfers. This will benefit handlers and the committee staff who process loans and transfers. Therefore, the committee recommended changing the prior period used to calculate an average week from five seasons to three seasons.

The committee also discussed revising the provisions in § 905.153(d) relating to overshipments and the loan or transfer of allotment during week 22. As stated previously, any handler may ship an amount of sizes 48 and 56 red seedless grapefruit up to 10 percent greater than their allotment during any regulated week. The quantity of such overshipment is deducted from the handler's allotment for the following week. Currently, overshipments are not allowed during week 22, because week 22 is the last week of the regulation period and does not provide an opportunity for repayment of any overshipments.

The committee is continuously meeting during the regulated period to discuss the market for red seedless grapefruit and possible changes to the weekly percentages. It believes that market conditions could cause it to recommend the removal of regulation prior to the end of week 22. To recognize this possibility, the committee recommended changing these provisions to specify that overshipments are not permitted during the last week of regulation rather than week 22.

Section 8e of the Act requires that whenever grade, size, quality or maturity requirements are in effect for certain commodities under a domestic marketing order, including grapefruit, imports of that commodity must meet the same or comparable requirements. This rule does not change the minimum grade and size requirements under the order. Therefore, no change is necessary in the grapefruit import regulations as a result of this action.

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 75 handlers of Florida grapefruit who are subject to regulation under the marketing order and approximately 11,000 growers of citrus in the regulated area. Small agricultural service firms, including handlers, are defined by the Small Business Administration (SBA) 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 $750,000 (13 CFR 121.201).

Based on industry and committee data, the average annual f.o.b. price for fresh Florida red seedless grapefruit during the 2003-04 season was approximately $7.58 per 4/5 -bushel carton, and total fresh shipments for the 2003-04 season are estimated at 24.7 million cartons of red grapefruit. Approximately 25 percent of all handlers handled 75 percent of Florida's grapefruit shipments. Using the average f.o.b. price, at least 80 percent of the grapefruit handlers could be considered small businesses under the SBA definition. Therefore, the majority of Florida grapefruit handlers may be classified as small entities. The majority of Florida grapefruit producers may also be classified as small entities.

This rule revises the procedures used to limit the volume of sizes 48 and 56 red seedless grapefruit entering the fresh market under the order. This rule changes the way a handler's average week is calculated for purposes of this limitation by adjusting the prior period used from the five preceding seasons to the three preceding seasons. This action also amends the language governing overshipments for the last week of regulation. This rule revises the provisions of § 905.153. Authority for this action is provided in § 905.52 of the order. The committee unanimously recommended this action at a meeting on June 15, 2004.

This rule revises procedures in § 905.153 used in implementing percentage size regulations for small red seedless grapefruit under the order. These procedures will be applied uniformly for all handlers regardless of size. This action is not expected to decrease the overall consumption of red seedless grapefruit.

While during the period of regulation this change may result in some handlers receiving a smaller allotment of small-sized red grapefruit, it provides additional allotment to those handlers that have increased shipments. This rule changes how each handler's share of the weekly allotment is calculated, but has a limited affect on the total allotment made available by the weekly percentages. This change in itself does not reduce the total weekly industry base available. It only reallocates the distribution of the base. Statistics for 2003-04 show that the total available industry allotment was used in only 3 weeks of the 22 week regulated period. This change should result in a better utilization of the overall industry base allotments. Because the base allotments will be readily available to those handlers needing it, handlers will be better able to meet buyer needs and additional shipments might result.

In addition, if handlers require additional allotment, they can still transfer, borrow, or loan allotment based on their needs in a given week. Approximately 315 loans and transfers were utilized last season. This rule will help reduce the need for loans and transfers by better allocating the available base. This will help reduce the amount of time and effort needed to reallocate allotment through loans and transfers. This may result in a cost savings by reducing administrative costs for the committee.

This rule provides handlers with allotment more reflective of their current operations. In addition, this rule changes the provisions on overshipments to provide for the possibility that the committee might choose to end regulation prior to week 22. This rule makes the regulation more responsive to industry needs and better allocates base quantities.

The committee discussed maintaining the number of seasons used to calculate the prior period at five. However, the committee believes that a three-season period will result in a better utilization of the overall industry base allotment. Therefore, this alternative was rejected.

This action will not impose any additional reporting or recordkeeping requirements on either small or large 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.

USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule. However, red seedless grapefruit must meet the requirements as specified in the U.S. Standards for Grades of Florida Grapefruit (7 CFR 51.760 through 51.784) issued under the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 through 1627).

In addition, the committee's meeting was widely publicized throughout the citrus 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 15, 2004, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. Finally, interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

This rule revises the procedures used to limit the volume of sizes 48 and 56 red seedless grapefruit entering the fresh market under the order. This rule also amends provisions governing overshipments. Any comments received will be considered prior to finalization of this rule.

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) This rule needs to be in place when the regulatory period begins September 20, 2004, and handlers need to consider their allotment and how best to service their customers; (2) the industry has been discussing this issue for some time, and the Committee has kept the industry well informed; (3) this action has been widely discussed at various industry and association meetings, and interested persons have had time to determine and express their positions; and (4) this rule provides a 30-day comment period and any comments received will be considered prior to finalization of this rule.

This rule is issued under Marketing Agreement Nos. 85 and 124 and Order Nos. 916 and 917, both as amended (7 CFR parts 916 and 917), regulating the handling of nectarines and peaches grown in California, respectively, hereinafter referred to as the “orders.” The marketing agreements and orders 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 (USDA) 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 orders now in effect, California nectarine and peach handlers are subject to assessments. Funds to administer the orders are derived from such assessments. It is intended that the assessment rates as issued herein will be applicable to all assessable nectarines and peaches beginning on March 1, 2004, 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 USDA 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 USDA 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 USDA'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 decreases the assessment rates established for the NAC for the 2004-05 and subsequent fiscal periods from $0.20 to $0.195 per 25-pound container or container equivalent of nectarines and for the PCC for the 2004-05 and subsequent fiscal periods from $0.20 to $0.19 per 25-pound container or container equivalent of peaches.

The nectarine and peach marketing orders provide authority for the committees, with the approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the programs. The members of the NAC and PCC are producers of California nectarines and peaches, respectively. They are familiar with the committees' needs, and with the costs for goods and services in their local area and are, thus, in a position to formulate appropriate budgets and assessment rates. The assessment rates are formulated and discussed in public meetings. Thus, all directly affected persons have an opportunity to participate and provide input.

The NAC recommended, for the 2004-05 fiscal period, and USDA approved, an assessment rate of $0.195 that would continue in effect from fiscal period to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the committee or other information available to USDA.

The NAC met on April 28, 2004, and unanimously recommended 2004-05 fiscal period expenditures of $5,162,866 and an assessment rate of $0.195 per 25-pound container or container equivalent of nectarines. In comparison, last year's expenditures were initially budgeted at $4,173,438. The assessment rate of $0.195 is $0.005 lower than the rate currently in effect.

After the 2003-04 fiscal period budget was formulated and recommended to USDA in May 2003, the committee received one Federal and two State grants which affected both committees' income and expenditures. The NAC also used reserve funds to conduct research on the development of a commercial nectarine beverage. The NAC subsequently unanimously recommended an amended budget for the 2003-04 fiscal period. Under this amended budget, the Federal grant of $533,921 and a State grant of $200,557 were applied to the export market development program, and a State grant of $3,667 was applied to the research program, along with $45,000 of reserve funds.

The assessment rate decrease for the 2004-05 fiscal period was recommended because excess funds from the 2003-04 fiscal period totaling $786,521 were carried into 2004-05. This is substantially higher than what the NAC deems satisfactory. Moreover, the 2004 nectarine crop is expected to be larger than last year's crop. The lower assessment rate also addresses the needs of nectarine growers and handlers who have been affected by low commodity prices for the last few years.

Total income received for the 2004-05 fiscal period is projected to be approximately $5,800,677. Decreasing the assessment rate from $0.20 to $0.195 per 25-pound container is expected to provide about $4,199,453 in assessment revenue, and along with other income, will allow the NAC to start the 2005 season with about $499,811 in reserve funds.

The major expenditures recommended by the NAC for the 2004-05 fiscal period include $219,872 for salaries and benefits, $146,613 for general expenses and industry activities, $1,153,676 for inspection, $208,568 for research, and $3,161,852 for domestic and export market development programs.

Budgeted expenses for these items in the 2003-04 fiscal period were initially estimated to be $226,121 for salaries and benefits, $142,612 for general expenses and industry activities, $1,210,220 for inspection, $138,929 for research, and $2,263,061 for domestic and export market development programs.

The major expenditures under the amended 2003-04 fiscal period budget include $226,121 for salaries and benefits, $142,612 for general expenses and industry activities, $1,210,220 for inspection, $187,596 for research, and $2,997,539 for domestic and export market development programs.

The 2004-05 fiscal period NAC assessment rate was derived after considering the total NAC expenses of $5,162,866; the estimated assessable nectarines of 22,245,000 twenty-five-pound containers or container equivalents; the estimated income from other sources, such as interest and grants; and the need for an adequate financial reserve to carry the NAC into the 2004 season. The committee has determined that a carry-in of $400,000 is historically necessary to meet its obligations in the early part of each season, before handler assessments are billed and received. To meet these goals, the NAC recommended an assessment rate of $0.195 per 25-pound container or container equivalent. According to the committee, that assessment rate will result in an adequate carry-in, while maintaining reserves within the maximum permitted by the order (approximately one year's expenses; § 916.42).

The PCC recommended, for the 2004-05 fiscal period, and USDA approved, an assessment rate of $0.19 that would continue in effect from fiscal period to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the committee or other information available to USDA.

The PCC also met on April 28, 2004, and recommended 2004-05 fiscal period expenditures of $5,178,002 and an assessment rate of $0.19 per 25-pound container or container equivalent of peaches. In comparison, last year's expenditures were initially budgeted at $4,086,316. The assessment rate of $0.19 is $0.01 lower than the rate currently in effect.

After the 2003-04 fiscal period budget was formulated and recommended to USDA in May 2003, the PCC received one Federal and two State grants which affected both committee income and expenditures. The committee subsequently unanimously recommended an amended budget for the 2003-04 fiscal period on June 23, 2004. Under this amended budget, the Federal grant of $488,845 and a State grant of $149,667 were applied to the export market development program, and a State grant of $3,667 was applied to the cultural research program.

The decrease for the 2004-05 fiscal period was recommended because excess funds from 2003-04 totaling $915,375 were carried into the 2004-05 fiscal period. This is substantially higher than needed by the PCC to cover early season expenses. In addition, the 2004 peach crop is expected to be higher than last year's crop. The lower assessment rate also addresses the needs of peach growers and handlers who have been affected by low commodity prices for the last few years.

Total income received for the 2004-05 fiscal period is projected to be approximately $5,883,385. Decreasing the assessment rate from $0.20 to $0.19 per 25-pound container is expected to provide about $4,153,654 assessment revenue, and along with other income, will allow the PCC to start the 2005 season with about $567,383 in reserve funds.

The major expenditures recommended by the PCC for the 2004-05 fiscal period include $219,872 for salaries and benefits, $148,598 for general expenses and industry activities, $1,240,520 for inspection, $208,570 for research, and $3,188,457 for domestic and export market development programs.

Budgeted expenditures for these items in the 2003-04 fiscal period were initially estimated to be $226,121 for salaries and benefits, $144,743 for general expenses and industry activities, $1,173,480 for inspection, $138,930 for research, and $2,211,346 for domestic and export market development programs.

The major expenditures under the amended budget for 2003-04 fiscal period include $226,121 for salaries and benefits, $144,743 for general expenses and industry activities, $1,173,480 for inspection, $142,597 for research, and $2,849,858 for domestic and export market development programs.

The 2004-05 fiscal period PCC assessment rate was derived after considering the total PCC expenses of $5,178,002; the estimated assessable peaches of 22,601,000 twenty-five-pound container or container equivalents; the estimated income from other sources, such as interest and grants; and the need for an adequate financial reserve to carry the PCC into the 2004 season. The committee has determined that a carry-in of $500,000 is historically necessary to meet its obligations in the early part of each season, before handler assessments are billed and received. To meet these goals, the PCC recommended an assessment rate of $0.19 per 25-pound container or container equivalent. According to the committee, that assessment rate will result in an adequate carry-in, while maintaining reserves within the maximum permitted by the order (one year's expenses; § 917.38).

The assessment rates established in this rule will continue in effect indefinitely unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the committees or other available information.

Although these assessment rates will be in effect for an indefinite period, the committees 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 rates. The dates and times of committee meetings are available from the committees' Web site or USDA. Committee meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate the committees' recommendations and other available information to determine whether modification of the assessment rate for each committee is needed. Further rulemaking will be undertaken as necessary. The committee's 2004-05 budget and those for subsequent fiscal periods will be reviewed and, as appropriate, approved by USDA.

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 250 California nectarine and peach handlers subject to regulation under the orders covering nectarines and peaches grown in California, and about 1,800 producers of these fruits in California. The Small Business Administration [13 CFR 121.201] defines small agricultural service firms as those whose annual receipts are less than $5,000,000. The Small Business Administration also defines small agricultural producers as those having annual receipts of less than $750,000. A majority of these handlers and producers may be classified as small entities.

The committees’ staff has estimated that there are less than 20 packers in the industry who could be defined as other than small entities. In the 2003 season, the average handler price received was $7.00 per container or container equivalent of nectarines or peaches. A handler would have to ship at least 714,286 containers to have annual receipts of $5,000,000. Given data on shipments maintained by the committees' staff and the average handler price received during the 2003 season, the committees' staff estimates that small packers represent approximately 94 percent of all the packers within the industry.

The committees’ staff has also estimated that less than 20 percent of the producers in the industry could be defined as other than small entities. In the 2003 season, the average producer price received was $4.00 per container or container equivalent for nectarines and peaches. A producer would have to produce at least 187,500 containers of nectarines and peaches to have annual receipts of $750,000. Given data maintained by the committees' staff and the average producer price received during the 2003 season, the committees' staff estimates that small producers represent more than 80 percent of the producers within the industry.

The nectarine and peach marketing orders provide authority for the committees, with the approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the programs. The members of the NAC and PCC are producers of California nectarines and peaches, respectively.

This rule decreases the assessment rates established for the NAC for the 2004-05 and subsequent fiscal periods from $0.20 to $0.195 per 25-pound container or container equivalent of nectarines and for the PCC for the 2004-05 and subsequent fiscal periods from $0.20 to $0.19 per 25-pound container or container equivalent of peaches.

The NAC recommended 2004-05 fiscal period expenditures of $5,162,866 for nectarines and an assessment rate of $0.195 per 25-pound container or container equivalent of nectarines. The assessment rate of $0.195 is $0.005 lower than the current rate. The PCC recommended expenditures of $5,178,002 for peaches and an assessment rate of $0.19 per 25-pound container or container equivalent of peaches. The assessment rate of $0.19 is $0.01 lower than the current rate.

The quantity of assessable nectarines for the 2004-05 fiscal period is estimated at 22,245,000 twenty-five-pound containers or container equivalents. Thus, the $0.195 rate should provide $4,337,775 in assessment income. Income derived from handler assessments and other sources will be adequate to cover budgeted expenses and permit an adequate reserve.

The NAC met on April 28, 2004, and recommended 2004-05 fiscal period expenditures of $5,162,866 and an assessment rate of $0.195 per 25-pound container or container equivalent of peaches. In comparison, last year's expenditures were initially budgeted at $4,173,438. The assessment rate of $0.19 is $0.005 lower than the rate currently in effect.

The major expenditures recommended by the NAC for the 2004-05 fiscal period include $219,872 for salaries and benefits, $146,613 for general expenses and industry activities, $1,153,676 for inspection, $208,568 for research, and $3,161,852 for domestic and export market development programs.

Budgeted expenses for these items in the 2003-04 fiscal period were initially estimated to be $226,121 for salaries and benefits, $142,612 for general expenses and industry activities, $1,210,220 for inspection, $138,929 for research, and $2,263,061 for domestic and export market development programs.

After the 2003-04 fiscal period budget was formulated and recommended to USDA in May 2003, the committee received one Federal and two State grants which affected both committee income and expenditures. The NAC also conducted research to test a commercial nectarine drink, using reserve funds. The committee subsequently unanimously recommended an amended budget for the 2003-04 fiscal period. Under this amended budget, the Federal grant of $533,921 and a State grant of $200,557 were applied to the export marketing development program, and a State grant of $3,667 was applied to the research program, along with $45,000 from the committee's reserves for the nectarine drink.

The major expenditures under the 2003-04 fiscal period amended budget include $226,121 for salaries and benefits, $142,612 for general expenses and industry activities, $1,210,220 for inspection, $187,596 for research, and $2,997,539 for domestic and export market development programs.

The lower assessment rate is possible because of the $915,375 in excess funds carried into the 2004-05 fiscal period. This will provide adequate funds at the beginning of the 2005 season before assessment collections begin. A financial reserve carry-in is desirable because major expense outlays for seasonal promotions and other activities occur before assessments are received.

The 2004-05 fiscal period assessment rate for the NAC was derived after considering the total NAC expenses of $5,162,866; the estimated assessable nectarines of 22,245,000 twenty-five-pound containers or container equivalents; the estimated income from other sources, such as interest; and the need for an adequate financial reserve to carry the NAC into the 2005 season. The committee has determined that a carry-in of $400,000 is historically necessary to meet its obligations in the early part of each season, before handler assessments are billed and received.

To meet this goal, the NAC recommended an assessment rate of $0.195 per 25-pound container or container equivalent. According to the committee, that assessment rate will result in an adequate carry-in, while carrying reserves within the maximum permitted by the order (one year's expenses; § 916.42).

The quantity of assessable peaches for the 2004-05 fiscal period is estimated at 22,601,000 twenty-five-pound containers or container equivalents. Thus, the $0.19 rate should provide $4,294,190 in assessment income. Income derived from handler assessments and other sources will be adequate to cover budgeted expenses and permit a small increase in reserves.

The PCC also met on April 28, 2004, and recommended 2004-05 fiscal period expenditures of $5,178,002 and an assessment rate of $0.19 per 25-pound container or container equivalent of peaches. In comparison, last year's expenditures were initially budgeted at $4,086,316. The assessment rate of $0.19 is $0.01 lower than the rate currently in effect.

The major expenditures recommended by the PCC for the 2004-05 fiscal period include $219,872 for salaries and benefits, $148,598 for general expenses and industry activities, $1,240,520 for inspection, $208,570 for research, and $3,188,457 for domestic and export market development programs.

The major expenditures initially recommended by the PCC for the 2003-04 fiscal period include $226,121 for salaries and benefits, $144,743 for general expenses and industry activities, $1,173,480 for inspection, $138,930 for research, and $2,211,346 for domestic and export market development programs.

After the 2003-04 fiscal period budget was formulated and recommended to USDA in May 2003, the committee received one Federal and two State grants which affected both committee income and expenditures. The committee subsequently unanimously recommended an amended budget for the 2003-04 fiscal period. Under this amended budget, the Federal grant of $488,845 and a State grant of $149,667 were applied to the export market development, and a State grant of $3,667 was applied to the cultural research program.

The major expenditures under the amended budget for the 2003-04 fiscal period include $226,121 for salaries and benefits, $144,743 for general expenses and industry activities, $1,173,480 for inspection, $142,597 for research, and $2,849,858 for domestic and export market development programs.

The lower assessment rate is possible because of the carry-in of $915,375 in excess funds from the 2003-04 fiscal period into the 2004-05 fiscal period. This is substantially higher than the PCC needs for early season expenses before assessment collections begin. A financial reserve carry-in of approximately $500,000 is desirable because major expense outlays for seasonal promotions and other activities occur before assessments are received.

The 2004-05 fiscal period assessment rate for the PCC was derived after considering the total PCC expenses of $5,178,002; the estimated assessable peaches of 22,601,000 twenty-five-pound containers or container equivalents; the estimated income from other sources, such as interest and grants; and the need for an adequate financial reserve to carry the PCC into the 2005 season. The committee has determined that a carry-in of $500,000 is historically necessary to meet its obligations in the early part of each season, before handler assessments are billed and received.

To meet this goal, the PCC recommended an assessment rate of $0.19 per 25-pound container or container equivalent. According to the committee, that assessment rate will result in an adequate carry-in, while keeping reserves within the maximum permitted by the order (one year's expenses; § 917.38).

Prior to arriving at these budgets, the committees considered information and recommendations from various sources, including, but not limited to: the Executive Committee, the Research Subcommittee, the International Programs Subcommittee, the Tree Fruit Quality Subcommittee, and the Domestic Promotion Subcommittee.

Each of the committees then reviewed the proposed expenses; the total estimated assessable 25-pound containers or container equivalents; and the estimated income from other sources, such as interest income and grants, prior to recommending a final assessment rate. The NAC decided that an assessment rate of $0.195 per 25-pound container or container equivalent will allow it to meet its 2004-05 fiscal period expenses and carry over an operating reserve of about $499,811 which is in line with the committee's financial needs. The PCC decided that an assessment rate of $0.19 per 25-pound container or container equivalent will allow it to meet its 2004-05 fiscal period expenses and carry over an operating reserve of $567,383, which is in line with the committee's financial needs. The committees then unanimously recommended these rates to USDA.

A review of historical and preliminary information pertaining to the upcoming fiscal period indicates that the grower price for the 2004 crop year for nectarines and peaches could range between $4.00 and $6.00 per 25-pound container or container equivalent. Therefore, the estimated assessment revenue for the 2004-05 fiscal period as a percentage of total grower revenue could range between 4.9 percent and 3.2 percent for nectarines, and 4.7 percent and 3.2 percent for peaches.

This action decreases 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 rates reduces the burden on handlers, and consequently may reduce the burden on producers.

The committees' meetings were widely publicized throughout the California nectarine and peach industries and all interested persons were invited to attend the meetings and participate in the committees' deliberations on all issues. Like all committee meetings, the April 28, 2004, meetings were public meetings and entities of all sizes were able to express views on this issue. Finally, interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.

This rule will impose no additional reporting or recordkeeping requirements on either small or large 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.

USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/mb.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

A 60-day comment period is provided to allow interested persons to respond to this rule. All written comments received will be considered before a final decision is made on this matter.

After consideration of all relevant material presented, including the committees' recommendations, 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 2004-05 fiscal period began on March 1, 2004, and the marketing orders require that the rates of assessment for each fiscal period apply to all assessable nectarines and peaches handled during such fiscal period; (2) the committees need to have sufficient funds to pay their expenses which are incurred on a continuous basis; and (3) handlers are aware of this action which was recommended by the committees at public meetings and is similar to other assessment rate actions issued in past years; (4) this interim final rule provides a 60-day comment period, and all comments timely received will be considered prior to finalization of this rule.

This rule is issued under Marketing Order No. 925 (7 CFR part 925), regulating the handling of 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.”

USDA is issuing this rule in conformance with Executive Order 12866.

This 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 USDA 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 USDA 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 USDA'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 in effect end-of-season reporting requirements authorized under the California grape order. Requiring handlers to file end-of-season grape shipment reports with the Committee enables the Committee to obtain accurate shipment data for assessment billing and for the next season's marketing decisions without incurring the expense of auditing every handler each year. Handler costs will continue to be reduced because the preparation and submission of end-of-season grape shipment reports is expected to be less costly and less time consuming than yearly handler audits. This action is in the best interest of producers and handlers.

Section 925.41 of the grape order provides authority to assess each person who first handles grapes a pro rata share of the expenses which are reasonable and likely to be incurred by the Committee during a fiscal period.

Section 925.215 of the order's rules and regulations establishes an assessment rate of $0.015 per 18-pound lug for grapes grown in a designated area of southeastern California.

Section 925.60(b) of the grape order provides authority for establishing reporting requirements. Under the marketing order, the Committee may, with the approval of the Secretary, establish reporting requirements to collect necessary information or data. The Committee needs data on grape shipments to provide an accurate basis for handler assessments and for the next season's marketing decisions.

Prior to publication of the interim final rule (69 FR 21689, April 22, 2004), the Committee obtained data on grape shipments during handler audits at the end of the season. These handler audits were time consuming and expensive for both the Committee staff and grape handlers. Detailed information follows on these burdens in the Final Regulatory Flexibility Analysis section of this document.

Therefore, at its January 15, 2004, meeting and as clarified at its February 5, 2004, meeting, the Committee unanimously recommended and USDA subsequently approved establishment of § 925.160 under the order's rules and regulations. Section 925.160 reads as follows: “Section 925.160 Reports. When requested by the California Desert Grape Administrative Committee, each shipper who ships grapes, shall furnish an end-of-season grape shipment report (CDGAC-3) to the Committee no later than 10 days after the last day of shipment for the season or such later time as the Committee deems appropriate. Such reports shall show the reporting period (the date of the handler's first shipment and the date of the handler's last shipment), the name and other identification of the shipper and grower, the invoice number, shipping date, varietal name, shipment destination (city and state or country), and the number of lugs shipped (pounds).”

The end-of-season grape shipment reporting requirements recommended by the Committee and subsequently approved by the USDA are similar to those required by the California Table Grape Commission (Commission) under a State of California program under which grape research and promotion activities are implemented. Because the Commission is prohibited from sharing confidential handler information, the Committee recommended that an end-of-season grape shipment report be developed for Committee use. Grape shipment data already compiled by handlers for the Commission will be attached to the Committee form to meet the new reporting requirements. Thus, handlers will not be duplicating their efforts and both agencies will receive necessary shipment data for respective program purposes.

The Committee estimates that this action will continue to impact 20 handlers of grapes and further estimates that, on average, each handler will expend approximately 30 minutes per year to prepare and submit this report and accompanying information to the Committee. The Committee believes that this action will continue to reduce handler costs, because the execution and submission of the end-of-season grape shipment report to the Committee is expected to be less costly and time consuming than yearly audits. The Committee vote was unanimous with nine in favor, zero opposed, and zero abstained. This revision does not impact the grape import regulation.

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 20 handlers of California grapes who are subject to regulation under the order and about 50 producers of grapes in the production area. Small agricultural service firms are defined by the Small Business Administration (13 CFR 121.201) 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 $750,000. Eight of the 20 handlers subject to regulation have annual grape sales of at least $5,000,000. In addition, 10 of the 50 producers have annual sales of at least $750,000. Therefore, a majority of handlers and producers may be classified as small entities.

This rule continues in effect end-of-season reporting requirements authorized under the California grape order. Requiring handlers to file end-of-season grape shipment reports with the Committee enables the Committee to obtain accurate shipment data for assessment billing and for the next season's marketing decisions without incurring the expense of auditing every handler each season. Handler costs will continue to be reduced because the preparation and submission of end-of-season grape shipment reports is expected to be less costly and less time consuming than yearly handler audits. This action is in the best interest of producers and handlers.

Section 925.41 of the grape order provides authority to assess each person who first handles grapes a pro rata share of the expenses which are reasonable and likely to be incurred by the Committee during a fiscal period.

Section 925.60(b) of the grape order provides authority for establishing reporting requirements. Under the marketing order, the Committee may, with the approval of the Secretary, establish reporting requirements to collect necessary information or data. The Committee needs data on grape shipments to provide an accurate basis for handler assessments and for the next season's marketing decisions.

Prior to issuance of the interim final rule, the Committee obtained data on grape shipments during handler audits at the end of the season. These handler audits are time consuming and expensive for both the Committee staff and grape handlers.

Therefore, at its January 15, 2004, meeting and as further clarified at the Committee's February 5, 2004, meeting, the Committee unanimously recommended and USDA subsequently approved establishing § 925.160 under the order's rules and regulations. Section 925.160 reads as follows: “Section 925.160 Reports. When requested by the California Desert Grape Administrative Committee, each shipper who ships grapes, shall furnish an end-of-season grape shipment report (CDGAC-3) to the Committee no later than 10 days after the last day of shipment for the season or such later time as the Committee deems appropriate. Such reports shall show the reporting period (the date of the handler's first shipment and the date of the handler's last shipment), the name and other identification of the shipper and grower, the invoice number, shipping date, varietal name, shipment destination (city and state), and the number of lugs shipped (pounds).”

The end-of-season reporting requirements recommended by the Committee and subsequently approved by the USDA are similar to those now required by the California Table Grape Commission (Commission). The Commission administers a State of California research and promotion program for grapes produced in California. Because the Commission is prohibited from sharing confidential handler information, the Committee recommended that an end-of-season grape shipment report be developed for Committee use. Shipment data currently compiled by handlers for the Commission will be able to be attached to the newly developed Committee form to meet the Committee's shipment information needs. Thus, handlers will not be duplicating their efforts and both agencies will receive necessary shipment data for program activities. The Committee estimates that 20 grape handlers will be affected by this action with a total annual industry burden of approximately 10 hours (20 handlers × 30 minutes = 10 hours).

The Committee believes that handler costs will continue to be reduced because the preparation and submission of the end-of-season grape shipment report to the Committee is expected to be less costly and time consuming than yearly audits. Prior to issuance of the interim final rule, the 20 grape handlers regulated under the order paid approximately $5,283 and expended approximately 126 man-hours annually for the yearly audits. Approximately 1/3 of the handler audits will continue to be conducted by the Committee for order compliance purposes each year. Therefore, the Committee continues to estimate that an annual savings of $3,698 and 88 man-hours for handlers will be realized through the use of the end-of-season shipment reports.

Additionally, this rule is expected to continue to affect the reduction in the number of hours of Committee staff time and administrative costs incurred by the Committee in conducting handler audits. Prior to issuance of the interim final rule, the Committee, in conducting audits of all industry handlers, annually spent about $3,600 and about 300 man-hours. If only one-third of the handlers are audited each year, the Committee expects to save about $2,400 and about 200 hours of Committee time. Thus, actual Committee costs using the new shipment form should be about $1,200 and 100 man-hours.

The Committee discussed alternatives to this change, including requiring handlers to submit the end-of-season grape shipment report 5 days after the end of the season. The Committee rejected the 5-day requirement, as they believe handlers need at least 10 days to complete end-of-season handler activities. Additionally, the Committee considered not establishing an end-of-season grape shipment report, but concluded, as previously mentioned, that adding an end-of-season grape shipment reporting requirement will significantly reduce handler costs, as submission of this report will be less costly and less time consuming than yearly handler audits. The Committee vote was unanimous with nine in favor, zero opposed, and zero abstained. This rule is in the interest of handlers and producers. These revisions do not impact the grape import regulation.

Further, the Committee's meetings were widely publicized throughout the grape industry and all interested persons were invited to attend the meetings and participate in the Committee's deliberations. Like all Committee meetings, the January 15, 2004, and February 5, 2004, meetings were public meetings and all entities, both large and small, were able to express their views on these issues.

An interim final rule concerning this action was published in the Federal Register on April 22, 2004. Copies of the rule were mailed, e-mailed or faxed by the Committee staff to all Committee members and grape handlers. In addition, the rule was made available through the Internet by the Office of the Federal Register and USDA. That rule provided for a 60-day comment period which ended June 21, 2004. No comments were received.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

As previously mentioned, this rule continues to impose some additional reporting and recordkeeping on both small and large grape handlers. This action continues to require one new Committee form. The information collection requirements are discussed below. 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. In addition, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), this notice announces that AMS has requested and obtained emergency approval from the Office of Management and Budget (OMB) for a new information collection request for Marketing Order No. 925, regulating the handling of grapes grown in a designated area of Southeastern California. This emergency approval was assigned OMB No. 0581-0220. The emergency request was necessary because insufficient time was available to follow normal clearance channels. Upon final approval by OMB, this collection will be merged with the forms currently approved for use under OMB No. 0581-0189 “Generic OMB Fruit Crops.”

Title: Grapes Grown in a Designated Area of Southeastern California; Marketing Order No. 925.

OMB Number: 0581-0220.

Type of Request: New collection.

Abstract: These information collection requirements are essential to carry out the intent of the Act, to provide the respondents the type of service they request, and to administer the California Desert Grape marketing order program, which has been operating since 1980.

On January 15, 2004, the Committee unanimously recommended and the USDA subsequently approved the establishment of § 925.160 under the order's rules and regulations, as further clarified by the Committee at its February 5, 2004, meeting. Section 925.160 requires handlers to furnish an end-of-season grape shipment report (CDGAC-3) to the Committee staff no later than 10 days after the last day of shipment for the season, or such later time, as the Committee deems appropriate. Any handler who ships grapes during the season will be required to report total shipments, and related information, to the Committee. The information requirements created by this action will be reported using one new Committee form, and by attaching shipment information required under the State of California research and promotion program to that form. The new reporting requirement assists the Committee in obtaining accurate shipment data for assessment billing and for the next season's marketing decisions.

The information collected will be used only by authorized representatives of the USDA, including AMS, Fruit and Vegetable Programs' regional and headquarters' staff, and authorized Committee employees. Authorized Committee employees are the primary users of the information and AMS is the secondary user.

The request for approval of the new information collection under the order is as follows:

End of Season Shipment Report, CDGAC Form No. 3

Estimate of Burden: Public reporting burden for this collection of information is estimated to average 30 minutes per response.

Respondents: Persons who ship California grapes from a designated area of Southeastern California.

Estimated Number of Respondents: 20.

Estimated Number of Responses per Respondent: 1.

Estimated Total Annual Burden on Respondents: 10 hours.

No comments were submitted on this information collection. As mentioned before, because there was insufficient time for a normal clearance procedure and prompt implementation was needed, AMS has obtained emergency approval from OMB for the use of this form for the 2004 regulation period, which began April 2004. Upon final approval by OMB, this collection will be merged with the forms currently approved for use under OMB No. 0581-0189 “Generic OMB Fruit Crops.”

After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is found that finalizing the interim final rule, without change, as published in the Federal Register (69 FR 21689, April 22, 2004) will tend to effectuate the declared policy of the Act.

This rule is issued under Marketing Agreement and Order No. 956, both as amended (7 CFR part 956), regulating the handling of Walla Walla sweet onions grown in Southeast Washington and Northeast Oregon, 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 (USDA) is issuing this rule in conformance with Executive Order 12866.

This 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 USDA 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 USDA 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 USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

Minimum grade, size, maturity, container, and pack requirements are authorized under the order, but currently only container markings are regulated. This rule continues in effect the implementation of procedures and safeguard requirements that allow grading, packing, or storing of Walla Walla sweet onions outside the production area, but within the States of Oregon and Washington. Persons desiring to ship, as well as those desiring to receive Walla Walla sweet onions for grading, packing, or storing outside the production area must apply and report to the Committee on forms provided by the Committee. This rule also continues in effect the additional requirement that handlers must submit a preseason registration form as well as provide additional information on the handler's shipment statement.

Section 956.63 of the order provides authority for the USDA to issue special regulations to facilitate the shipping of Walla Walla sweet onions for grading, packing, or storing outside the production area. Further, § 956.66 provides authority for the establishment of such safeguards as may be necessary to ensure that Walla Walla sweet onions are shipped for the purpose so authorized. Reporting requirements are authorized in § 956.80.

The Committee met on December 8, 2003, and unanimously recommended the establishment of procedures and safeguard requirements to allow the grading, packing, or storing of Walla Walla sweet onions outside the production area. At that meeting, the Committee also unanimously recommended expanding the current handler reporting requirements to include a preseason registration form. The Committee met again on February 10, 2004, and made a unanimous recommendation to broaden the scope of the handler shipment statement to include a listing of producers whose product was handled and the quantity handled for each producer. Committee members believe that this rule will: (1) Allow shippers to use grading, packing, or storing facilities that will be most beneficial to their individual circumstances; (2) contribute to the efficient operation of the program by improving Committee information; and (3) enhance compliance with the provisions of the order.

The grading, packing, and storing costs associated with preparing Walla Walla sweet onions for market may vary between onion packing facilities inside and outside the production area. There may also be differences in the type and variety of packaging options, the transportation alternatives available, or the level of services offered by individual onion packing facilities inside and outside the production area. This rule allows shippers of Walla Walla sweet onions the flexibility to pack and ship product from the most advantageous facility available, regardless of where in Oregon or Washington that facility is located.

Some examples of situations in which this rule benefits the industry are: (1) A packer outside the area of production is experimenting with modified atmosphere packaging that increases the shelf life of sweet onions; (2) a Walla Walla sweet onion producer is part owner of a packing facility located outside the area of production and wishes to pack and store sweet onions in that facility; (3) a packing facility outside the area of production can offer rail service for shipping and a rail siding is not available within the production area; and (4) a fresh produce marketing company that has a packing facility outside the area of production desires to begin packing and shipping Walla Walla sweet onions.

The Committee believes that the regulations established under the order create orderly marketing, are good for consumers, encourage repeat purchases, and ultimately improve returns to producers. Therefore, the Committee recommended the establishment of safeguards to ensure that all Walla Walla sweet onions graded, packed, or stored outside the production area are ultimately subject to the requirements established under the order.

Persons desiring to ship or receive Walla Walla sweet onions for grading, packing, or storing outside the production area must apply to the Committee on a Shippers/Receivers Application for Certificate of Privilege, (SRACP) Form No. 3. Applicants must complete and submit a SRACP form each year prior to shipping or receiving Walla Walla sweet onions for grading, packing, or storing outside the production area. Information collected on the application includes the company name, contact name, address, contact telephone numbers, signature of the shipper or receiver, date, and such other information as the Committee may require. Applicants must agree to furnish reports on shipments of sweet onions made under the Certificate of Privilege and must certify that all shipments of production area onions for grading, packing, or storing outside the production area will be made in accordance with order provisions. Those parties acting as receivers under the Certificate of Privilege must further agree to forward all assessments due on sweet onions handled to the Committee office. If approved, the Committee manager will sign the application, assign a Certificate of Privilege number for tracking purposes, and return a copy of the application to the applicant. If denied, the applicant will be notified in writing of the reasons for denial and have an opportunity to appeal the Committee's decision.

After the Committee approves the applications of both the shipper and the receiver, Walla Walla sweet onions may be shipped out of the production area for grading, packing, or storing. When the parties conclude shipping or receiving, both the shipper and receiver must submit to the Committee a Special Purpose Shipment Report, (SPSR) Form No. 4. Information collected on the SPSR includes the Certificate of Privilege number as assigned by the Committee, company name, contact name, address, contact telephone numbers, names of the individuals or companies shipped to or received from, the total quantities of onions shipped or received in 50-pound equivalents, the signature of the shipper or receiver, date, and such other information as the Committee may require.

The SPSR, as well as any assessments due, must be submitted to the Committee no later than 30 days after the date of the last shipment or receipt of Walla Walla sweet onions under the Certificate of Privilege. The SPSR also reiterates that it is the receiver of sweet onions shipped under the Certificate of Privilege that is responsible for payment of the administrative assessment. Shippers and receivers will only be required to submit one (1) of these reports annually.

This rule also continues in effect increased handler-reporting requirements by requiring the submission of a Walla Walla Sweet Onion Handler Registration Form, (Registration) Form No. 2, and by expanding the scope of the information required on the existing Handler's Statement of Walla Walla Sweet Onion Shipments, (Form No. 1; Form FV-141) (Statement). Each year prior to the shipping season, but in no case later than May 31, all persons desiring to handle Walla Walla sweet onions during the forthcoming season must complete a Registration form and submit it to the Committee. Information collected on this form includes: Company name, contact name, signature, date, addresses, and contact telephone numbers; brands or labels to be marketed; estimated acres of production to be packed; and such other information as the Committee may require.

The previous Statement, which was submitted to the Committee at the end of each shipping season, required handlers to report the quantity of Walla Walla sweet onions handled during the season. This action continues in effect the expansion of the information collected on the Statement to include reporting the quantity of Walla Walla sweet onions handled on behalf of each producer. Information collected on the Registration and modified Statement forms will greatly enhance order compliance by allowing the Committee to compare the collected data with information from other sources for corroboration. This will ultimately assist the Committee in monitoring onion shipments and in the collection of assessments. For example, acreage and production information voluntarily provided by producers will be reconciled with similar information collected from handlers to help ensure that all assessable sweet onion shipments have been properly reported and that assessments have been correctly collected.

This information collection is important to the Committee in light of the regulation relaxation that allows the grading, packing, or storing of Walla Walla sweet onions outside the production area. The Committee believes that enhancing the scope of the reporting requirements is the best way to maintain oversight of the special purpose shipment procedures as modified herein. In addition to enhancing the Committee's compliance efforts, the collection of handler profile information such as addresses and contact numbers will also be useful to the Committee for maintaining contact with handlers throughout the season.

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 28 handlers of Walla Walla sweet onions subject to regulation under the order and approximately 37 Walla Walla sweet onion producers in the regulated area. Small agricultural service firms are defined by the Small Business Administration (SBA) (13 CFR 121.201) 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 $750,000.

The Committee estimates that in 2003, 674,038 50-pound containers of Walla Walla sweet onions were marketed at an average FOB price of about $11.50 per container. The total industry value at shipping point was approximately $7,751,437, leaving an average annual gross receipt per handler of $276,837. Thus, a majority of handlers and producers of Walla Walla sweet onions may be classified as small entities.

Committee meetings are widely publicized in advance of the meetings and are held in a location central to the production area. The meetings are open to all industry members and other interested persons who are encouraged to participate in the deliberations and voice their opinions on topics under discussion. Thus, Committee recommendations can be considered representative of small business interests in the industry.

This rule continues the implementation of procedures that allow persons to ship or receive Walla Walla sweet onions outside the area of production for grading, packing, or storing purposes. Persons desiring to do so must first apply to the Committee. The applicants must certify that all Walla Walla sweet onions graded, packed, or stored outside the production area will meet any minimum grade, size, maturity, container, pack, or inspection requirements established under the order. Previously, only container, assessment, and reporting requirements were implemented under the order. After the Committee completes its review of the application and determines that everything is in order, applicants will be granted a Certificate of Privilege authorizing them to ship or receive Walla Walla sweet onions outside the production area for market preparation. At the end of the shipping season, both the shipper and receiver must submit reports to the Committee regarding the quantity of Walla Walla sweet onions handled under Certificate of Privilege. The authority for this action is provided in §§ 956.63 and 956.66.

In addition, this rule continues in effect the expansion of the handler reporting requirements by adding a preseason handler registration form and expanding the scope of information required on the handler's shipment report. These changes provide the Committee with more comprehensive handler information that improves handler compliance and enhances safeguards already in place. The additional information gathered from the new mandatory report complements the modification to the current reporting requirements and contributes to greater efficiency in the operation of the program. The improved safeguards and oversight afforded the Committee with these reporting requirement changes are essential in maintaining compliance with procedures for market preparation outside the production area. The authority for this action is provided in § 956.80.

Regarding the impact of this action on affected entities, this rule imposes minimal additional costs. The Committee estimates that about 10 persons may desire to ship or receive Walla Walla sweet onions for grading, packing, or storing outside the production area during each marketing year. Such shippers and receivers must complete a Shippers/Receivers Application for Certificate of Privilege, (Form No. 3) and submit it to the Committee for approval each year prior to shipping or receiving any Walla Walla sweet onions for grading, packing, or storing outside the production area. Once the Committee has approved the application, the parties will be free to handle sweet onions for market preparation out of the production area.

After Walla Walla sweet onions have been handled pursuant to the Certificate of Privilege, both the shipper and receiver must submit a Special Purpose Shipment Report (Form No. 4) , to the Committee no later than 30 days after the date of the last shipment or receipt of onions. The Committee estimates that 10 shippers and receivers will each be obligated to submit one (1) of these reports annually. The annual industry burden associated with the information collection on both forms is estimated to total approximately 3.6 hours.

The addition of a preseason registration form and the expansion of the existing reporting requirements for all Walla Walla sweet onion handlers also imposes minimal additional costs on the industry. Persons desiring to handle Walla Walla sweet onions must complete and submit a Walla Walla Sweet Onion Handler Registration Form (Form No. 2) , prior to May 31 of each year. Handlers of sweet onions must also submit a Handler's Statement of Walla Walla Sweet Onion Shipments (Form No. 1; Form FV-141) that is more detailed than the one previously used. The Committee estimates that 28 handlers are affected, with a total annual industry burden of approximately 25.76 hours for both forms.

The Committee considered one alternative to the part of this proposal that allows Walla Walla sweet onions to be graded, packed, or stored out of the area. The alternative was to prohibit any grading, packing, or storing of Walla Walla sweet onions outside the production area. The Committee felt that this alternative would have limited the flexibility of shippers in making marketing decisions related to the grading, packing, or storing of Walla Walla sweet onions and it was therefore rejected. Allowing the shipment of Walla Walla sweet onions outside the production area for grading, packing, or storing is a relaxation of order requirements and any costs related to additional reporting is outweighed by the benefits of allowing such shipments.

The alternatives that the Committee discussed with regard to increasing handler reporting requirements were: (1) Maintain the status quo and make no changes in the reporting requirements; and (2) make the submission of the registration form and producer information on the shipment statement voluntary instead of mandatory. Both of these options were rejected as not sufficiently addressing the need for better handler information. Enhanced information collection will help improve the Committee's ability to ensure industry compliance with the order. This is especially important in light of the relaxation changes in the order regulations allowing grading, packing, or storing outside the production area.

This rule continues to impose an additional reporting and recordkeeping burden on persons who ship or receive Walla Walla sweet onions for grading, packing, or storing outside the production area. This action requires three new Committee forms and modification of a previous form. In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the information collection requirements on these three new Committee forms and the modification of the previous form were approved by the Office of Management and Budget (OMB) under OMB Control No. 0581-0221 on April 13, 2004.

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. In addition, as noted in the initial regulatory flexibility analysis, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

The Committee's meetings were widely publicized throughout the sweet onion industry and all interested persons were invited to attend the meetings and participate in Committee deliberations on all issues. Like all Committee meetings, the December 8, 2003, and the February 10, 2004, meetings were public meetings and all entities, both large and small, were able to express their views.

An interim final rule concerning this action was published in the Federal Register on April 26, 2004 (69 FR 22377). Copies of the rule were mailed by the Committee's staff to all Committee members and Walla Walla sweet onion handlers. In addition, the rule was made available through the Internet by the Office of the Federal Register and the USDA. That rule provided a 60-day comment period which ended June 25, 2004. No comments were received.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is found that finalizing the interim final rule, without change, as published in the Federal Register (69 FR 22377, April 26, 2004) will tend to effectuate the declared policy of the Act.

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.”

USDA is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the order provisions now in effect, final free and reserve percentages may be established for raisins acquired by handlers during the crop year. This rule continues to establish final free and reserve percentages for NS raisins for the 2003-04 crop year, which began August 1, 2003, and ends July 31, 2004. 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 USDA 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 USDA 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 USDA'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 in effect final volume regulation percentages for 2003-04 crop NS raisins covered under the order. The volume regulation percentages are 70 percent free and 30 percent reserve, and were established through an interim final rule published on April 22, 2004 (69 FR 21695). Free tonnage raisins may be sold by handlers to any market. Reserve raisins must be held in a pool for the account of the Committee and are disposed of through various programs authorized under the order. For example, reserve raisins may be sold by the Committee to handlers for free use or to replace part of the free tonnage raisins they exported; used in diversion programs; carried over as a hedge against a short crop; or disposed of in other outlets not competitive with those for free tonnage raisins, such as government purchase, distilleries, or animal feed.

The volume regulation percentages are intended to help stabilize raisin supplies and prices, and strengthen market conditions. The Committee unanimously recommended final percentages on February 12, 2004.

Section 989.54 of the order prescribes procedures and time frames to be followed in establishing volume regulation. This includes methodology used to calculate percentages. Pursuant to § 989.54(a) of the order, the Committee met on August 14, 2003, to review shipment and inventory data, and other matters relating to the supplies of raisins of all varietal types. The Committee computed a trade demand for each varietal type for which a free tonnage percentage might be recommended. Trade demand is computed using a formula specified in the order and, for each varietal type, is equal to 90 percent of the prior year's shipments of free tonnage and reserve tonnage raisins sold for free use into all market outlets, adjusted by subtracting the carryin on August 1 of the current crop year, and adding the desirable carryout at the end of that crop year. As specified in § 989.154(a), the desirable carryout for NS raisins shall equal the total shipments of free tonnage during August and September for each of the past 5 crop years, converted to a natural condition basis, dropping the high and low figures, and dividing the remaining sum by three, or 60,000 natural condition tons, whichever is higher. For all other varietal types, the desirable carryout shall equal the total shipments of free tonnage during August, September and one-half of October for each of the past 5 crop years, converted to a natural condition basis, dropping the high and low figures, and dividing the remaining sum by three.

At its August 2003 meeting, the Committee computed and announced the 2003-04 trade demand for NS raisins at 210,933 tons. The August trade demand, however, did not account for Oleate Seedless raisins (Oleates). Beginning with the 2003-04 crop year, the NS varietal type was modified to include Oleates (68 FR 42943; July 21, 2003). Prior to that time, Oleates were a separate varietal type. The Oleate and NS trade demands were calculated separately. Then the two individual trade demand figures were added together to obtain a combined trade demand reflecting the new combined varietal type. The Committee establishes a 500-ton minimum trade demand for any varietal type for which the computed trade demand is zero or less. The computed trade demand for Oleates was less than zero, so the Committee established the trade demand for Oleates at 500 tons. At USDA's request, the Committee met on September 9, 2003, and recomputed the combined NS trade demand to account for Oleates at 211,493 tons (210,933 plus 500).

Section 989.54(b) of the order requires that the Committee announce, on or before October 5, preliminary crop estimates and determine whether volume regulation is warranted for the varietal types for which it computed a trade demand. That section allows the Committee to extend the October 5 date up to 5 business days if warranted by a late crop.

The Committee met on October 2, 2003, and announced a preliminary crop estimate for NS raisins of 276,931 tons, which is about 20 percent lower than the 10-year average of 348,419 tons. NS raisins are the major varietal type of California raisin. Adding the carryin inventory of 116,465 tons, plus the 276,931-ton crop estimate resulted in a total available supply of 393,396 tons, which was significantly higher (186 percent) than the 211,493-ton trade demand. Thus, the Committee determined that volume regulation for NS raisins was warranted. The Committee announced preliminary free and reserve percentages for NS raisins, which released 85 percent of the computed trade demand since the field price (price paid by handlers to producers for their free tonnage raisins) had been established. The preliminary percentages were 65 percent free and 35 percent reserve.

In addition, preliminary percentages were announced for Other Seedless raisins. It was ultimately determined that volume regulation was only warranted for NS raisins. As in past seasons, the Committee submitted its marketing policy to USDA for review.

Pursuant to § 989.54(c), at its February 12, 2004, meeting, the Committee announced interim percentages for NS raisins to release slightly less than the full trade demand. Based on a revised NS crop estimate of 304,072 tons (up from the October estimate of 276,931 tons), interim percentages for NS raisins were announced at 69.75 percent free and 30.25 percent reserve.

Pursuant to § 989.54(d), the Committee also recommended final percentages at its February 2004 meeting to release the full trade demand for NS raisins. Final percentages were recommended at 70 percent free and 30 percent reserve. The Committee's calculations to arrive at final percentages for NS raisins are shown in the table below:

In addition, USDA's “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” (Guidelines) specify that 110 percent of recent years' sales should be made available to primary markets each season for marketing orders utilizing reserve pool authority. This goal was met for NS raisins by the establishment of final percentages, which released almost 100 percent of the trade demand, and offers of additional reserve raisins for sale to handlers for free pursuant to § 989.54(g) (“10 plus 10 offers”), and § 989.67(j) of the order.

As specified in § 989.54(g), the 10 plus 10 offers are two offers of reserve pool raisins, which are made available to handlers during each season. For each such offer, a quantity of reserve raisins equal to 10 percent of the prior year's shipments is made available for free use. Handlers may sell their 10 plus 10 raisins to any market.

For NS raisins, the first 10 plus 10 offer was made in February 2004, and the second offer was made in April 2004. A total of 61,026 tons was made available to raisin handlers through these offers, and all of the raisins were purchased. Adding the total figure of 61,026 tons of 10 plus 10 raisins to the 207,638 tons of free tonnage raisins acquired by handlers from producers through the week ending June 19, 2004, plus 129,345 tons of 2002-03 carryin NS and Oleate inventory, equates to 398,009 tons of natural condition raisins, or 373,117 tons of packed raisins, that are available to handlers for free use or primary markets. This is almost 130 percent of the quantity of NS raisins shipped during the 2002-03 crop year (305,133 natural condition tons or 286,260 packed tons). (Oleates were included in this computation because, as previously stated, Oleates were combined with the NS varietal type beginning with the 2003-04 crop year.)

In addition to the 10 plus 10 offers, § 989.67(j) of the order provides authority for sales of reserve raisins to handlers under certain conditions such as a national emergency, crop failure, change in economic or marketing conditions, inadequate carryover, or if free tonnage shipments in the current crop year exceed shipments of a comparable period of the prior crop year. Such reserve raisins may be sold by handlers to any market. When implemented, the additional offers of reserve raisins make even more raisins available to primary markets, which is consistent with USDA's Guidelines.

The Committee plans to offer 5,714 tons of 2002-03 NS reserve raisins for sale to handlers for free use pursuant to § 989.67(j). Free tonnage deliveries as of June 19, 2004, were 207,638 tons, which is 3,855 tons below the 211,493-ton trade demand. Offering 3,855 tons of reserve raisins for sale to handlers for free use would allow the industry to make available the full 211,493-ton trade demand. Free tonnage shipments from August 2003 through May 2004 are 1,859 tons greater than free tonnage shipments during the same period last year. Adding the 1,859 tons to the 3,855 tons equates to a total of 5,714 tons of reserve being offered to handlers for free use under § 989.67(j) of the order.

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 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 are defined by the Small Business Administration (13 CFR 121.201) 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 $750,000. 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. No more than 7 handlers, and a majority of producers, of California raisins may be classified as small entities.

Since 1949, the California raisin industry has operated under a Federal marketing order. The order contains authority to, among other things, limit the portion of a given year's crop that can be marketed freely in any outlet by raisin handlers. This volume control mechanism is used to stabilize supplies and prices and strengthen market conditions.

Pursuant to § 989.54(d) of the order, this rule continues in effect final volume regulation percentages for 2003-04 crop NS raisins. The volume regulation percentages are 70 percent free and 30 percent reserve. Free tonnage raisins may be sold by handlers to any market. Reserve raisins must be held in a pool for the account of the Committee and are disposed of through certain programs authorized under the order.

Volume regulation is warranted this season for NS raisins because acquisitions of 296,625 tons through the week ending June 19, 2004, combined with the carryin inventory of 129,345 tons, results in a total available supply of 425,970 tons, which is about 200 percent higher than the 211,493-ton trade demand. (Oleate inventory was included in this computation because, as previously stated, Oleates were combined with the NS varietal type beginning with the 2003-04 crop year.)

The current volume regulation procedures have helped the industry address its marketing problems by keeping supplies in balance with domestic and export market needs, and strengthening market conditions. The current volume regulation procedures fully supply the domestic and export markets, provide for market expansion, and help reduce the burden of oversupplies in the domestic market.

Raisin grapes are a perennial crop, so production in any year is dependent upon plantings made in earlier years. The sun-drying method of producing raisins involves considerable risk because of variable weather patterns.

Even though the product and the industry are viewed as mature, the industry has experienced considerable change over the last several decades. Before the 1975-76 crop year, more than 50 percent of the raisins were packed and sold directly to consumers. Now, over 60 percent of raisins are sold in bulk. This means that raisins are now sold to consumers mostly as an ingredient in another product such as cereal and baked goods. In addition, for a few years in the early 1970's, over 50 percent of the raisin grapes were sold to the wine market for crushing. Since then, the percent of raisin-variety grapes sold to the wine industry has decreased.

California's grapes are classified into three groups—table grapes, wine grapes, and raisin-variety grapes. Raisin-variety grapes are the most versatile of the three types. They can be marketed as fresh grapes, crushed for juice in the production of wine or juice concentrate, or dried into raisins. Annual fluctuations in the fresh grape, wine, and concentrate markets, as well as weather-related factors, cause fluctuations in raisin supply. This type of situation introduces a certain amount of variability into the raisin market. Although the size of the crop for raisin-variety grapes may be known, the amount dried for raisins depends on the demand for crushing. This makes the marketing of raisins a more difficult task. These supply fluctuations can result in producer price instability and disorderly market conditions.

Volume regulation is helpful to the raisin industry because it lessens the impact of such fluctuations and contributes to orderly marketing. For example, producer prices for NS raisins remained fairly steady from the 1993-94 through the 1997-98 seasons, although production varied. As shown in the table below, during those years, production varied from a low of 272,063 tons in 1996-97 to a high of 387,007 tons in 1993-94, or about 42 percent. According to Committee data, the total producer return per ton during those years, which includes proceeds from both free tonnage plus reserve pool raisins, has varied from a low of $904.60 in 1993-94 to a high of $1,049 in 1996-97, or 16 percent. Total producer prices for the 1998-99 and 1999-2000 seasons increased significantly due to back-to-back short crops during those years. Producer prices dropped dramatically for the last three seasons due to record- size production, large carry-in inventories, and stagnant demand.

There are essentially two broad markets for raisins—domestic and export. In recent years, both export and domestic shipments have been decreasing. Domestic shipments decreased from a high of 204,805 packed tons during the 1990-91 crop year to a low of 156,325 packed tons in 1999-2000. In addition, exports decreased from 114,576 packed tons in 1991-92 to a low of 91,600 packed tons in the 1999-2000 crop year.

In addition, the per capita consumption of raisins has declined from 2.07 pounds in 1988 to 1.48 pounds in 2002. This decrease is consistent with the decrease in the per capita consumption of dried fruits in general, which is due to the increasing availability of most types of fresh fruit throughout the year.

While the overall demand for raisins has been decreasing (as reflected in the decline in commercial shipments), production has been increasing. Deliveries of NS dried raisins from producers to handlers reached an all-time high of 432,616 tons in the 2000-01 crop year. This large crop was preceded by two short crop years; deliveries were 240,469 tons in 1998-99 and 299,910 tons in 1999-2000. Deliveries for the 2000-01 crop year soared to a record level because of increased bearing acreage and yields. Deliveries for the 2001-02 crop year were 377,328 tons, and deliveries for the 2002-03 crop year were 388,010 tons. Deliveries through the week ending June 19, 2004, of the current crop year were at 296,625 tons. Three crop years of high production and a large 2001-02 carryin inventory have contributed to the industry's burdensome supply of raisins.

The order permits the industry to exercise supply control provisions, which allow for the establishment of free and reserve percentages, and establishment of a reserve pool. One of the primary purposes of establishing free and reserve percentages is to equilibrate supply and demand. If raisin markets are over-supplied with product, producer prices will decline.

Raisins are generally marketed at relatively lower price levels in the more elastic export market than in the more inelastic domestic market. This results in a larger volume of raisins being marketed and enhances producer returns. In addition, this system allows the U.S. raisin industry to be more competitive in export markets.

To assess the impact that volume control has on the prices producers receive for their product, an econometric model has been constructed. The model developed is for the purpose of estimating nominal prices under a number of scenarios using the volume control authority under the Federal marketing order. The price producers receive for the harvest and delivery of their crop is largely determined by the level of production and the volume of carryin inventories. The Federal marketing order permits the industry to exercise supply control provisions, which allow for the establishment of reserve and free percentages for primary markets, and a reserve pool. The establishment of reserve percentages impacts the production that is marketed in the primary markets.

The reserve percentage limits what handlers can market as free tonnage. Assuming the 30 percent reserve limits the total free tonnage to 207,638 natural condition tons (.70 × 296,625 tons delivered through June 19, 2004) and carryin is 129,345 natural condition tons, and purchases from reserve total 66,740 natural condition tons (which includes reserve raisins released through both 10 plus 10 offers plus the offer under § 989.67(j)), then the total free supply is estimated at 403,723 natural condition tons. The econometric model estimates prices to be $63 per ton higher than under an unregulated scenario. This price increase is beneficial to all producers regardless of size and enhances producers' total revenues in comparison to no volume control. Establishing a reserve allows the industry to help stabilize supplies in both domestic and export markets, while improving returns to producers.

Free and reserve percentages are established by varietal type, and usually in years when the supply exceeds the trade demand by a large enough margin that the Committee believes volume regulation is necessary to maintain market stability. Accordingly, in assessing whether to apply volume regulation or, as an alternative, not to apply such regulation, it has been determined that volume regulation is warranted this season for only one of the nine raisin varietal types defined under the order.

The free and reserve percentages established by this rule release the full trade demand and apply uniformly to all handlers in the industry, regardless of size. For NS raisins, with the exception of the 1998-99 crop year, small and large raisin producers and handlers have been operating under volume regulation percentages every year since 1983-84. There are no known additional costs incurred by small handlers that are not incurred by large handlers. While the level of benefits of this rulemaking are difficult to quantify, the stabilizing effects of volume regulation impact small and large handlers positively by helping them maintain and expand markets even though raisin supplies fluctuate widely from season to season. Likewise, price stability positively impacts small and large producers by allowing them to better anticipate the revenues their raisins will generate.

There are some reporting, recordkeeping and other compliance requirements under the order. The reporting and recordkeeping burdens are necessary for compliance purposes and for developing statistical data for maintenance of the program. The requirements are the same as those applied in past seasons. Thus, this action imposes no additional reporting or recordkeeping burdens on either small or large handlers. The forms require information which is readily available from handler records and which can be provided without data processing equipment or trained statistical staff. The information collection and recordkeeping requirements have been previously approved by the Office of Management and Budget (OMB) under OMB Control No. 0581-0178. As with other similar marketing order programs, reports and forms are periodically studied to reduce or eliminate duplicate information collection burdens by industry and public sector agencies. In addition, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

Further, Committee and subcommittee meetings are widely publicized in advance and are held in a location central to the production area. The meetings are open to all industry members, including small business entities, and other interested persons who are encouraged to participate in the deliberations and voice their opinions on topics under discussion.

An interim final rule concerning this action was published in the Federal Register on April 22, 2004 (69 FR 21695). Copies of the rule were mailed to all Committee members and alternates, the Raisin Bargaining Association, handlers, and dehydrators. In addition, the rule was made available through the Internet by the Office of the Federal Register and USDA. That rule provided for a 60-day comment period that ended on June 21, 2004. No comments were received.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

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.

The OCC's current regulations at 12 CFR part 5 do not require the approval of the OCC before a national bank substantially changes the composition of its assets through sale or other disposition, nor do they require prior OCC review or approval before a national bank charter becomes a “stripped” or “dormant” bank charter. Likewise, our regulations do not address a dormant national bank's increase in asset size through purchases or acquisitions to engage again in the business of banking. On January 7, 2004, we proposed to add to our regulations a prior approval requirement for these fundamental changes in a bank's asset composition in order to address the supervisory concerns raised by these types of transactions. See 69 FR 892 (Jan. 7, 2004).

As described in the preamble to the proposed rule, these concerns may include increased operations risk, increased concentration risk (especially where asset composition changes as a result of divestiture), and the ability of bank management to implement the new strategy successfully. In addition, a dormant bank being revived may propose to engage in activities that significantly deviate or are a change from the bank's original business plan or operations. If ill conceived, poorly planned, or inadequately executed, these new activities can expose the bank to imprudent levels of risk, with the potential for adverse consequences for the bank's financial condition and, in the extreme situation, for its viability. Even entry into lines of business that are traditional for national banks may present elevated levels of risk to a particular bank if the bank expands substantially or too quickly from a dormant status, misjudges its markets, or fails to ensure that bank management and internal control systems keep pace with the change. The preamble to the proposal also noted that concerns raised by the acquisition of a dormant bank by a third party necessitates the need for the OCC to thoroughly review the nature of the services and products that might be initiated by an acquiring entity.

For the reasons discussed in this preamble, we are adopting in final form a rule that is substantially the same as the proposal with a few modifications described later in this preamble discussion.

We proposed to add a new § 5.53 to subpart D of 12 CFR part 5 to require a national bank to obtain the OCC's prior written approval before undertaking either of two types of fundamental changes in the composition of the bank's assets: (1) Changing the composition of all, or substantially all, of its assets through sales or other dispositions, or (2) after having sold or disposed of all, or substantially all, of its assets, subsequently purchasing or otherwise acquiring assets. Proposed § 5.53(d) specified that this approval requirement would not apply to a change in composition of all, or substantially all, of a bank's assets if the bank undertakes the change in response to direction from the OCC ( e.g. , in an enforcement action pursuant to 12 U.S.C. 1818) or pursuant to a statute or regulation that requires OCC review or approval ( e.g. , a voluntary liquidation pursuant to 12 U.S.C. 181 and 12 CFR 5.48).

The proposed rule stated that, in reviewing applications filed under § 5.53, we would consider the purpose of the transaction, its impact on the safety and soundness of the bank, and any effect on the bank's customers. It further stated that we may deny the application if the transaction would have a negative effect in any such respect.

This proposed rule also provided that if a national bank has sold or otherwise disposed of its assets in a transaction requiring approval pursuant to proposed § 5.53, our review of any subsequent change in asset composition through purchase or other acquisition would include, in addition to the forgoing factors, the factors governing the organization of a de novo bank under 12 CFR 5.20.

Finally, the proposed rule made a conforming change to § 5.20 to provide that any use of the term “operating plan” or “operating plans” would be changed to “business plan or operating plan” or “business plans or operating plans,” as appropriate. As explained in the preamble, current § 5.20 only uses the term “operating plan” when referring to the document that describes a national bank's management goals, earnings objectives, and lines of business. However, the banking industry more commonly uses the term “business plan” to refer to this document. The term “business plan” also typically is used by the OCC and the other Federal banking agencies in policy statements, applications, and internal documents. The OCC proposed this change to eliminate any confusion about whether a substantive difference between the two terms is intended. No such difference was intended, and the two terms may be used interchangeably.

The OCC received four comments on the proposed rule. Two comments were submitted by trade associations, one by a national bank, and one by an individual. One commenter, a trade association, supported the proposal in full, with no recommended changes. Specifically, this commenter stated that recent examples of troubled banks that have markedly changed their business operations make this rule appropriate. Furthermore, this commenter noted that because extremely large shifts in the composition of a bank's assets may be made rapidly in today's market, the OCC should review management control and capability issues before such changes take place, rather than at the next examination. Finally, this commenter stated that because such an asset change occurs rarely, the rule should not pose significant new burdens on community or other national banks.

Another commenter proposed a technical drafting amendment. The two remaining commenters raised a number of issues with the proposed rule, which we address in the following discussion.

Scope of Applicability of Proposed Rule. One commenter, a national bank, suggested that large banks, their domestic operating subsidiaries, and their foreign subsidiaries should be exempt from the proposed rule. It stated that a formal application process was unnecessary because these large institutions are supervised by resident OCC examiners who are familiar with the bank's operations and management. Therefore, they concluded, a large bank could not undertake a fundamental change in the composition of assets without the full knowledge, and approval, of OCC staff.

We have declined to make this change. While, as the commenter observes, our large bank resident examiners are very familiar with the operations and management of the banks they supervise, the types of fundamental changes covered by this rule also have legal and policy implications that warrant an interdisciplinary review by other OCC staff, as well as input from the supervisory staff with immediate responsibility for the bank. The formal application process prescribed by this final rule provides the OCC with the best opportunity both to review the safety and soundness of the transaction and to assess the bank's compliance with applicable law. This is consistent with our current rules, which similarly do not exempt large banks from other types of application requirements.

This same commenter requested clarification about how the new approval requirement would apply when there are multiple national bank charters within a single bank holding company structure. We note in response that the final rule applies to each individual national bank, whether or not the bank is part of a holding company. Therefore, a separate application is required of each bank in a holding company structure that proposes to change its asset composition in one of the ways covered by the final rule.

In addition, this commenter requested that the final rule exclude the sales of assets under asset securitization programs where the selling bank continues to have contractual obligations with respect to the securitization, such as acting as servicer of the loans involved. The commenter indicated that securitization strategies and activities do not represent a fundamental change in banking activities. We decline to exempt all asset securitizations from the scope of the final rule because we believe there may be certain scenarios where securitization transactions would fall under this application requirement. For example, we believe that a stripped charter subject to the new approval requirement would result where a bank proposes to make a one-time transfer of all, or substantially all, of its assets into a trust for securitization purposes while retaining only the business of servicing the loans. If, on the other hand, a bank is in the ongoing business of originating loans and securitizing them in order to fund new originations, and it does fund those new originations so that it continually is replenishing the assets it has securitized, then we agree that the ongoing securitization activity does not subject the bank to the requirements of the final rule. This distinction between securitizations that are part of a bank's ordinary and ongoing business and those that are not is consistent with the description of what constitutes a “dormant bank” that appears later in this preamble discussion. We have amended the final rule to clarify the application of this requirement to securitizations.

Another commenter, a trade association, asked us to explain how the new rule would apply in cases covered by the OCC's Significant Deviation Policy. 1 The OCC imposes the “significant deviation condition” on certain charter and conversion applications. Under this condition, a bank must provide the OCC at least 60 days' prior written notice of its intent to significantly deviate or change from its business plan or operations and must obtain the OCC's written determination of no objection before the bank engages in any significant deviation or change from its business plan or operations. The significant deviation condition expressly states that “[i]f such deviation is the subject of an application filed with the OCC, the OCC does not require any further notice to the supervisory office.” Therefore, as a general matter, a bank that is covered both by § 5.53 and by the condition imposed pursuant to the Significant Deviation Policy only would need to file an application under § 5.53.

This same commenter thought that it was redundant, and therefore unnecessary; to apply the new approval requirement to transactions that also would require a notice under the Change in Bank Control Act (CBCA). 2 However, the CBCA requires the purchaser of the bank, and not the bank itself, to file a notice with the OCC. Furthermore, the statutory factors that the OCC considers in deciding whether to disapprove a CBCA notice are different and more limited than those we will consider in reviewing an application under the final rule.

The CBCA factors include considerations such as the effect of the proposed acquisition on competition; the financial condition, competence, experience, and integrity of the proposed acquirers; the competence, experience, and integrity of the proposed managers of the bank; and the effect of the transaction on the Federal deposit insurance funds. Like the proposal, this final rule provides that, in reviewing a bank's application to make a fundamental change in its asset composition, the OCC will consider the purpose of the transaction, the safety and soundness of the bank, and any effect on the bank's customers. None of these considerations is specifically captured by the CBCA factors. Accordingly, the application required by new § 5.53 is not redundant of the CBCA notice, and we decline to make an exception in the final rule for transactions involving a change in bank control.

Application Process. A trade association commenter requested that the final rule provide guidance on the specific application process of proposed § 5.53, and asked whether and how the public notice and comment provision in part 5 applies to applications under the proposed rule. The procedural rules in subpart A of part 5, Rules of General Applicability, generally govern all application requirements in part 5 “unless otherwise stated.”  3 Among other things, subpart A provides for a public notice and comment process, and, as part of that process, permits “any person” to submit a written request for a hearing. 4

Part 5 states that the public notice and comment procedures and the opportunity for a hearing do not apply to most filings pertaining to a change in a national bank's activities. 5 The issues presented by such filings typically concern the safety and soundness of, or the legal authority for, the proposed activity. Since the application requirement imposed by this final rule similarly pertains to a change in a bank's activities in certain circumstances, and since the principal issues presented are likely to be safety and soundness or legal issues, we conclude that the public procedures otherwise required by part 5 are not necessary in connection with all applications under § 5.53. We recognize, however, that they may be appropriate in particular cases. Accordingly, the final rule provides that those procedures do not apply unless the OCC determines otherwise due to the significance or novelty of the issues raised by a particular application.

However, we note that a change in composition of assets subject to § 5.53 may be part of a bank's implementation of a new business strategy that subjects the bank to other filing requirements that require public procedures (such as the branch closure notice requirement found in 12 U.S.C. 1831r-1). Nothing in this final rule excepts or excuses the bank from compliance with public procedures imposed in connection with those other filing requirements.

This same commenter also requested that expedited procedures be available for an “eligible bank,” i.e. , a bank that is well capitalized, well managed, and that has a satisfactory or better CRA rating, as they are under OCC rules for applications and notices covering other changes to activities and operations. The OCC does not agree that an expedited process is warranted for these types of applications. By definition, the changes covered by § 5.53 constitute a fundamental shift in activities and operations that may have serious safety and soundness implications unique to each bank that proposes these changes. The OCC's evaluation of such a significant departure from the bank's existing activities and operations requires an evaluation that does not lend itself to the type of expedited consideration available in the other types of filings to which the commenter refers. Accordingly, we decline to accept the commenter's suggestion. However, we expect that, at most, only a few banks a year would be subject to this requirement, and that it will therefore not have a broad or burdensome effect on the national banking system as a whole.

The final rule does not prescribe time frames or other procedural details with respect to the applications covered by § 5.53, which are matters typically addressed in the Comptroller's Licensing Manual . 6 We expect the procedures governing this new application requirement would be generally consistent with those that we use for the processing of other, similar types of applications.

Definition of “all, or substantially all” of assets. The proposed rule applied the prior approval requirement when a national bank changes the composition of “all, or substantially all,” of its assets, or, after having sold or disposed of all, or substantially all, of its assets, subsequently purchases or acquires new assets. One commenter asked that we quantify the phrase “substantially all” by establishing that the “sales or other dispositions” must affect at least 95% of the bank's assets. We decline to make this change because a bright-line standard could encourage the structuring of asset dispositions or acquisitions with a view toward avoiding the requirements of § 5.53. The approach taken in the final rule also is consistent with our rules implementing the Bank Merger Act (BMA), 12 U.S.C. 1828(c)(2), where we similarly use and apply the phrase “all, or substantially all” of the assets without relying on a bright-line, quantitative definition. 7

Definition of “dormant bank”. In the proposal, we described a bank that has divested all, or substantially all, of its assets as a “dormant bank.” One commenter suggested that we define this term. By “dormant bank,” we mean a bank that is no longer engaged in core banking activities other than on a de minimis basis. This definition includes, for example, a bank that has significantly reduced its activities and services or that has contracted out significant portions of its operations to third-party service providers, other than in the ordinary course of the bank's ongoing business. This same definition applies to the references to a “stripped charter” in the preamble. We have not included this definition in the text of the regulation, since the term is not used there, but we will include this clarification in future revisions to the Comptroller's Licensing Manual that discuss the requirements of § 5.53.

Conforming change to the term “operating plan”. We received no comments on the proposed rule's conforming change to § 5.20 that provides that any use of the term “operating plan” will be changed to “business plan or operating plan”. Therefore, we adopt this change as proposed.

New § 5.53(a) sets out the OCC's authority for adopting this regulation. 8

Section 5.53(b) describes the scope of applicability of the regulation. We have moved to this Scope provision the statement (which appeared in the proposal at § 5.53(d)) that this approval requirement does not apply to a change in asset composition that the bank undertakes in response to direction from the OCC ( e.g. , in an enforcement action pursuant to 12 U.S.C. 1818).

The proposal also excepted from the § 5.53 approval requirement changes in asset composition undertaken pursuant to a statute or regulation that requires prior OCC review or approval. The proposal cited voluntary liquidations undertaken pursuant to 12 U.S.C. 181 and 12 CFR 5.48 as an example illustrating when this exception would apply. For the following reasons, we have removed this language and substituted a narrower exception that clarifies when the final rule applies to voluntary liquidations.

First, the proposal would have exempted stripped charters that are part of a BMA transaction  9 from the application requirement of § 5.53. BMA transactions are the ones that most commonly present the situation where a bank changes asset composition pursuant to a statute or regulation that requires OCC review or approval. However, the BMA process focuses on acquiring entities and does not address the concerns that may arise when the target bank is a stripped or dormant charter. Because the acquisition of a dormant bank charter in a BMA transaction likely will result in the revival of business in the dormant charter, the transaction presents the same concerns that support adoption of the final rule. Accordingly, we have determined that they are appropriately covered by new § 5.53.

Second, we have clarified the application of the new approval requirement to voluntary liquidations by adding an express exemption for a bank that changes its asset composition as part of a voluntary liquidation pursuant to 12 U.S.C. 181 and 182 and 12 CFR 5.48, but only if the liquidating bank has stipulated in its notice of liquidation to the OCC that its liquidation will be completed, the bank dissolved, and its charter returned to the OCC within one year of the date it filed this notice, unless the OCC extends the time period. This change eliminates the § 5.53 application process for those voluntary liquidations that will not result in a dormant bank charter of indefinite duration, while retaining OCC review for those liquidations that are most likely to pose safety and soundness concerns.

Thus, we have concluded that the most common transactions involving a stripped or dormant bank charter should be subject to the § 5.53 application requirement because they are likely to present the concerns that have prompted this rulemaking. So do voluntary liquidations, unless it is clear that the liquidating bank will give up its charter by a date certain. We think it is unlikely that changes in asset composition will be undertaken pursuant to statutes or regulations other than the BMA (and our implementing regulation) or the voluntary liquidation statute (and our implementing regulation). Accordingly, we have determined that it is unnecessary to retain the exemption as originally proposed.

For reasons described in our discussion of the comments, we have also changed this scope provision to clarify that the new application requirement does not apply to a change in composition of assets that is part of a bank's ordinary and ongoing business of originating and securitizing loans.

Section 5.53(c) contains the new application requirement. It requires a national bank to obtain the OCC's prior written approval before changing the composition of all, or substantially all, of its assets: (1) Through sales or other dispositions, or (2) after having sold or disposed of all, or substantially all, of its assets, through subsequent purchases or other acquisitions or other expansions of its operations.

The final rule adds the reference to “other expansions” of a national bank's operations. The proposal provided that a national bank with a dormant charter must file an application and obtain the prior written approval of the OCC “before changing the composition of all, or substantially all, of its assets, through subsequent purchases or other acquisitions.” This language could have been misread to cover only acquisitions of assets from third parties. We intended the word “acquisitions” to be read broadly, however. A national bank with a dormant charter could restart operations by obtaining—“acquiring”—assets through any means, including generating new assets through the bank's own efforts. For example, we intended that a national bank with a dormant charter that restarts business by first taking new deposits and then using those deposits to fund new assets would be covered by the application requirement in § 5.53. The language in the final rule more clearly indicates this result.

Section 5.53(c)(2) provides that when reviewing an application filed under this section, the OCC will consider the purpose of the transaction, its impact on the safety and soundness of the bank, and any effect on the bank's customers, and that we may deny the application if the transaction would have a negative effect in any such respect. In addition, § 5.53(c)(2) provides that our review of any changes in the asset composition of a dormant bank, through purchase or other acquisition or other expansions of its operations under § 5.53(c)(1)(ii), will include, in addition to the foregoing factors, the factors governing the organization of a de novo bank under § 5.20. 10

As we indicated in the preamble to the proposed rule, a national bank that has disposed of all or substantially all of its assets before the effective date of this regulation must comply with the prior approval requirement before it purchases or otherwise acquires new assets or expands its operations after this regulation takes effect. We have reworded the second sentence in § 5.53(c)(2) slightly to make it clear that the applicability of the de novo factors for renewed asset activity is unaffected by whether the bank had previously obtained the OCC's approval to dispose of its assets.

As indicated in the preamble to the proposed rule, the reasons for the proposed decrease in asset size, future plans for the bank charter (including any plans for liquidation), future asset growth, future plans to market or sell the charter, and future business plans, as applicable, will be relevant to our review of an application to dispose of all, or substantially all, of a bank's assets. In addition, depending on the circumstances presented in the bank's application, our approval of the bank's disposition of all, or substantially all, of its assets will address how long the dormant charter may continue, and could include a requirement that the bank submit a plan of liquidation.

In reviewing an application in connection with an increase in the assets of a stripped charter, we also will consider the bank's future business plan and whether this plan involves activities that significantly deviate from the bank's original business plan or operations prior to its stripped status. Furthermore, we will consider the applicant's staffing plans, plans for oversight of the activity within the bank, and accountability to the board of directors, along with the applicant's plans to acquire, develop, or modify internal control systems adequate to monitor the new activity.

Section 5.53(d) provides that the public procedures otherwise prescribed by subpart A of part 5 do not apply to applications filed pursuant to § 5.53, unless the OCC determines that some or all of those procedures should apply because of the significance or novelty of the issues presented by a particular application.

The final rule also makes a conforming change to § 5.20 to provide that any use of the term “operating plan” or “operating plans” will be changed to “business plan or operating plan” or “business plans or operating plans,” as appropriate.

Pursuant to section 605(b) of the Regulatory Flexibility Act, the Comptroller of the Currency certifies that this final rule will not have a significant economic impact on a substantial number of small entities. This final rule will impose minimum burden on only a small number of national banks, regardless of asset size.

Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4 (Unfunded Mandates Act) requires that an agency prepare a budgetary impact statement before promulgating a rule that includes a Federal mandate that may result in expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. The OCC has determined that this final rule will not result in expenditures by State, local, or tribal governments or by the private sector of $100 million or more. Accordingly, the OCC has not prepared a budgetary impact statement or specifically addressed the regulatory alternatives considered.

The Comptroller of the Currency has determined that this final rule does not constitute a “significant regulatory action” for the purposes of Executive Order 12866.

In accordance with the requirements of the Paperwork Reduction Act of 1995, the OCC may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The information collection requirements contained in this final rule have been reviewed and approved by the OMB under OMB Control Number 1557-0014.

The information collection requirements are contained in § 5.53. Section 5.53 requires a national bank to submit an application to the OCC before changing the composition of all, or substantially all, of its assets through sales or other dispositions or, having sold or disposed of all or substantially all of its assets, through subsequent purchases or other acquisitions. The time per response to complete an application is estimated to be five hours and the number of respondents is estimated to be five national banks. The OMB approved burden as follows:

The likely respondents are national banks.

Estimated number of respondents: 5.

Estimated number of responses: 5.

Estimated total burden hours per response: 5 hours.

Estimated total annual burden hours: 25 hours.

The Truth in Lending Act (TILA; 15 U.S.C. 1601-1666j) requires creditors to disclose credit terms and the cost of consumer credit as a dollar amount and as an annual percentage rate. The act requires additional disclosures for loans secured by a consumer's home, and permits consumers to cancel certain transactions that involve their principal dwelling. TILA is implemented by the Board's Regulation Z (12 CFR part 226). The Board's official staff commentary (12 CFR part 226 (Supp. I)) interprets the regulation, and provides guidance to creditors in applying the regulation to specific transactions.

The Home Ownership and Equity Protection Act amendments to TILA were enacted in 1994 as part of the Riegle Community Development and Regulatory Improvement Act of 1994, Pub. L. 103-325, 108 Stat. 2160. In 1995, the Board published amendments to Regulation Z implementing HOEPA (60 FR 15463). These amendments, contained in §§ 226.32 and 226.34 of the regulation, impose substantive limitations and additional disclosure requirements on certain closed-end home mortgage loans bearing rates or fees above a certain percentage or amount. As enacted, the statute requires creditors to comply with the HOEPA rules if the total points and fees payable by the consumer at or before loan consummation exceed the greater of $400 or 8 percent of the total loan amount. TILA and Regulation Z provide that the $400 figure shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index (CPI) that was reported on the preceding June 1. ( See 15 U.S.C. 1602(aa)(3) and 12 CFR 226.32(a)(1)(ii)). The Board adjusted the $400 amount to $499 for the year 2004.

The Bureau of Labor Statistics publishes consumer-based indices monthly, but does not “report” a CPI change on June 1; adjustments are reported in the middle of each month. The Board uses the CPI-U index, which is based on all urban consumers and represents approximately 87 percent of the U.S. population, as the index for adjusting the $400 dollar figure. The adjustment to the CPI-U index reported by the Bureau of Labor Statistics on May 15, 2004, was the CPI-U index “in effect” on June 1, and reflects the percentage increase from April 2003 to April 2004. The adjustment to the $400 figure below reflects a 2.29 percent increase in the CPI-U index for this period and is rounded to whole dollars for ease of compliance.

Effective January 1, 2005, for purposes of determining whether a home mortgage transaction is covered by 12 CFR 226.32 (based on the total points and fees payable by the consumer at or before loan consummation), a loan is covered if the points and fees exceed the greater of $510 or 8 percent of the total loan amount. Comment 32(a)(1)(ii)-2, which lists the adjustments for each year, is amended to reflect the dollar adjustment for 2005. Because the timing and method of the adjustment is set by statute, the Board finds that notice and public comment on the change are unnecessary.

The Board certifies that this amendment will not have a substantial effect on regulated entities because the only change is to raise the threshold for transactions requiring HOEPA disclosures.

Airworthiness Directive (AD) 2002-16-22, amendment 39-12861, applicable to certain Boeing Model 727 series airplanes that have been converted from a passenger- to a cargo-carrying (“freighter”) configuration, was published in the Federal Register on August 15, 2002 (67 FR 53434). That AD requires, among other actions, installation of a fail-safe hinge, redesigned main deck cargo door warning and power control systems, and 9g crash barrier.

As published, Note 5 of AD 2002-16-22 states, “Installation of National Aircraft Service, Inc. (NASI), Vent Door System STC ST01438CH, is an acceptable means of compliance with the requirements of paragraph (e) of this AD.” However, the correct supplemental type certificate (STC) is ST01270CH, as discussed in paragraph 13 of “Main Deck Cargo Door Systems” in the preamble of the final rule. Paragraph 13 also contains an error in that it refers to “Pemco ST01270CH” rather than “NASI ST01270CH.”

Since no other part of the regulatory information has been changed, the final rule is not being republished in the Federal Register

On July 20, 2004, the FAA issued AD 2004-15-03, Amendment 39-13737 (69 FR 45562; July 30, 2004). That AD requires:

• Initial and repetitive visual and eddy current inspections of certain SN stage 5 LPT disks and stage 6 LPT disks.

• Replacement of the suspect disks as optional terminating action to the repetitive inspections.

• Replacement of certain stage 5 LPT disks and stage 6 LPT disks.

That AD was the result of a report of a stage 5 LPT disk that failed due to cracking from low-cycle-fatigue (LCF) during factory testing. That condition, if not corrected, could result in uncontained engine failure.

Since that AD was issued, we discovered that we published an incorrect part number (P/N) of 6089T89P01 for stage 6 LPT disks. This AD revision corrects that P/N to 6078T89P01. Also, since that AD was issued, we determined that credit for actions completed per previous releases of Alert Service Bulletin CF34-AL S/B 72-A0173 need to be allowed. This AD revision adds a paragraph in the compliance section to allow that credit.

We have reviewed and approved the technical contents of GE Alert Service Bulletin No. CF34-AL S/B 72-A0173, Revision 3, dated July 20, 2004, that lists applicable disks by SN, and describes the procedures for performing visual and eddy current inspections on the applicable stage 5 LPT disks and stage 6 LPT disks.

The unsafe condition described previously is likely to exist or develop on other GE CF34-3A1 and -3B1 series turbofan engines of the same type design. We are issuing this AD to prevent LCF failure of stage 5 LPT disks and stage 6 LPT disks, which could lead to uncontained engine failure. This AD requires:

• Initial and repetitive visual and eddy current inspections of certain SN stage 5 LPT disks and stage 6 LPT disks.

• Replacement of the suspect disks as optional terminating action to the repetitive inspections.

• Replacement of certain stage 5 LPT disks and stage 6 LPT disks.

Since an unsafe condition exists that requires the immediate adoption of this AD, we have found that notice and opportunity for public comment before issuing this AD are impracticable, and that good cause exists for making this amendment effective in less than 30 days.

We have implemented new procedures for maintaining AD dockets electronically. As of May 17, 2004, we posted new AD actions on the DMS and assigned a DMS docket number. We track each action and assign a corresponding Directorate identifier. The DMS docket No. is in the form “Docket No. FAA-200X-XXXXX.” Each DMS docket also lists the Directorate identifier (“Old Docket Number”) as a cross-reference for searching purposes.

This AD is a final rule that involves requirements affecting flight safety and was not preceded by notice and an opportunity for public comment; however, we invite you to submit any written relevant data, views, or arguments regarding this AD. Send your comments to an address listed under ADDRESSES. Include “AD Docket No. FAA-2004-18648; Directorate Identifier 2004-NE-26-AD” in the subject line of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify it.

We will post all comments we receive, without change, to http://dms.dot.gov , including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this AD. Using the search function of the DMS Web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc. ). You may review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78) or you may visit http://dms.dot.gov .

We are reviewing the writing style we currently use in regulatory documents. We are interested in your comments on whether the style of this document is clear, and your suggestions to improve the clarity of our communications with you. You can get more information about plain language at http://www.faa.gov/language and http://www.plainlanguage.gov .

You may examine the docket that contains the AD, any comments received, and any final disposition in person at the DMS Docket Offices between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone (800) 647- 5227) is located on the plaza level of the Department of Transportation Nassif Building at the street address stated in ADDRESSES. Comments will be available in the AD docket shortly after the DMS receives them.

We have determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the regulation:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a summary of the costs to comply with this AD and placed it in the AD Docket. You may get a copy of this summary at the address listed under ADDRESSES.

This document contains amendments to 26 CFR part 1. On December 24, 2002, the IRS and Treasury Department published in the Federal Register a notice of proposed rule making (67 FR 78398) by cross reference to temporary regulations (REG-138882-02; 67 FR 78367) under section 121(c) of the Internal Revenue Code (Code). The regulations relate to the exclusion of gain from the sale or exchange of the principal residence of a taxpayer who has not owned and used the property as the taxpayer's principal residence for two of the preceding five years or who has excluded gain on the sale or exchange of a principal residence within the preceding two years. Written and electronic comments were received. No public hearing was requested or held.

After considering all of the comments, the proposed regulations are adopted as amended by this Treasury decision, and the corresponding temporary regulations are removed.

Under section 121(a), a taxpayer may exclude up to $250,000 ($500,000 for certain joint returns) of gain realized on the sale or exchange of the taxpayer's principal residence if the taxpayer owned and used the property as the taxpayer's principal residence for at least two years during the five-year period ending on the date of the sale or exchange. Section 121(b)(3) allows the taxpayer to apply the maximum exclusion to only one sale or exchange during the two-year period ending on the date of the sale or exchange. Section 121(c) provides that a taxpayer who fails to meet any of the conditions by reason of a change in place of employment, health, or, to the extent provided in regulations, unforeseen circumstances, may be entitled to an exclusion in a reduced maximum amount.

The temporary regulations provide, as a general definition, that a sale or exchange is by reason of change in place of employment, health, or unforeseen circumstances only if the taxpayer's primary reason for the sale or exchange is a change in place of employment, health, or unforeseen circumstances. The temporary regulations provide factors that may be relevant in determining the taxpayer's primary reason for the sale or exchange.

One commentator asserted that the factors are beyond Congressional intent, unnecessary, and overbroad. The final regulations retain the list of factors because it is helpful in determining the taxpayer's primary reason for the sale or exchange.

For each of the three grounds for claiming a reduced maximum exclusion, the temporary regulations provide a general definition and one or more safe harbors. Under the temporary regulations, if a safe harbor applies, the taxpayer's “primary reason” for the sale or exchange is deemed to be change in place of employment, health, or unforeseen circumstances. For greater simplicity, the final regulations delete the primary reason test from the safe harbors and provide that, if a safe harbor applies, the sale or exchange is deemed to be “by reason of” a change in place of employment, health, or unforeseen circumstances. If a safe harbor does not apply, the taxpayer may be eligible to claim a reduced maximum exclusion if the taxpayer establishes, based on the facts and circumstances, that the taxpayer's primary reason for the sale or exchange is a change in place of employment, health, or unforeseen circumstances.

The temporary regulations provide that a sale or exchange is by reason of unforeseen circumstances if the primary reason for the sale or exchange is the occurrence of an event that the taxpayer does not anticipate before purchasing and occupying the residence. One commentator asserted that this definition is beyond Congressional intent and would allow any circumstance giving rise to the sale or exchange of property to qualify for a reduced maximum exclusion.

The final regulations revise the definition of a sale or exchange by reason of unforeseen circumstances from “an event that the taxpayer did not anticipate” to “an event that the taxpayer could not reasonably have anticipated” before purchasing and occupying the residence. Additionally, the final regulations clarify that a sale or exchange by reason of unforeseen circumstances (other than a sale or exchange within a safe harbor) does not qualify for the reduced maximum exclusion if the primary reason for the sale or exchange is a preference for a different residence or an improvement in financial circumstances. The final regulations provide additional examples illustrating the application of the reduced maximum exclusion rules to situations outside of the unforeseen circumstances safe harbors.

Under the temporary regulations, a taxpayer's primary reason for the sale or exchange is deemed to be unforeseen circumstances if one of the following safe harbor events occurs during the taxpayer's ownership and use of the property: (1) Involuntary conversion of the residence, (2) a natural or man made disaster or act of war or terrorism resulting in a casualty to the residence, and (3) in the case of a qualified individual, (a) death, (b) the cessation of employment as a result of which the individual is eligible for unemployment compensation, (c) a change in employment or self-employment status that results in the taxpayer's inability to pay housing costs and reasonable basic living expenses for the taxpayer's household, (d) divorce or legal separation under a decree of divorce or separate maintenance, (e) multiple births resulting from the same pregnancy, or (f) an event determined by the Commissioner to be an unforeseen circumstance. A taxpayer who does not qualify for a safe harbor may demonstrate that, under the facts and circumstances, the primary reason for the sale or exchange is unforeseen circumstances.

Commentators suggested that marriage, bankruptcy of the taxpayer's employer not resulting in the loss of the taxpayer's employment, and the adoption of a family member should be additional unforeseen circumstances safe harbors that qualify for the reduced maximum exclusion.

The final regulations do not adopt these comments. Marriage and adoption are voluntary events that typically lack the degree of unforeseeability common in the other unforeseen circumstances safe harbors, and bankruptcy of the taxpayer's employer unaccompanied by a change in employment status of the taxpayer does not impact the taxpayer's current ability to pay housing costs. However, these events may still qualify for the reduced maximum exclusion under the facts and circumstances test if, as a result of such an event, the taxpayer's primary reason for the sale or exchange is a change in place of employment, health, or unforeseen circumstances.

For purposes of the reduced maximum exclusion by reason of unforeseen circumstances, the temporary regulations provide that a qualified individual includes the taxpayer, the taxpayer's spouse, a co-owner of the residence, and a person whose principal place of abode is in the same household as the taxpayer.

A commentator suggested that the unforeseen circumstances exception should be limited to events involving only the taxpayer and the taxpayer's spouse. The commentator stated that, under this narrower exception, a safe harbor for death would be unnecessary because little, if any, gain would result as a consequence of the step-up in basis provisions of the Code. The commentator also asserted that the safe harbor for involuntary conversions is redundant and unnecessary because section 1033 already provides for non-recognition of gain in such circumstances.

The final regulations do not adopt these comments. The inclusion in the safe harbors of events affecting co-owners and co-inhabitants is appropriate because these events may affect the taxpayer's ability to pay housing costs. The involuntary conversion safe harbor is also appropriate, as both the non-recognition provisions of section 1033 and the exclusion provisions of section 121 may apply to a conversion of property. See section 121(d)(5).

The temporary regulations provide that unforeseen circumstances include events determined by the Commissioner to be unforeseen circumstances to the extent provided in published guidance of general applicability or in a ruling directed to a specific taxpayer. The final regulations clarify that taxpayers may rely on only those determinations made by the Commissioner in published guidance of general applicability. A ruling directed to a specific taxpayer does not establish a safe harbor of general applicability.

The temporary regulations provide that a sale or exchange of a residence is by reason of health if the primary reason for the sale or exchange is to obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or to obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. A sale or exchange that is merely beneficial to the general health or well-being of the individual is not a sale or exchange by reason of health. This definition is based on the definition of medical care under section 213.

A commentator suggested eliminating the term diagnosis from the definition of sale or exchange by reason of health because taxpayers rarely would sell a residence merely to obtain a diagnosis of a disease, illness, or injury. The final regulations do not adopt this suggestion because, while such sales are likely to be uncommon, they may occur. In addition, retaining diagnosis in the general definition of sale or exchange by reason of health maintains uniformity with the definition of medical care under section 213 and reduces complexity.

A commentator suggested that the regulations should clarify that, under section 6501, the statute of limitations on assessments arising from the use of the exclusion begins to run from the filing date for the year of the sale or exchange. The final regulations do not address this issue because the issue is well-settled by statute and rules regarding the statute of limitations on assessments are outside the scope of these regulations.

Numerous commentators suggested that members of the uniformed services should be accorded a special exception to the use requirement because they are often required to be away from home for extended periods of time and unable to use a property as their principal residence for at least two years during the five-year period prior to a sale or exchange. The final regulations reflect enactment of the Military Family Tax Relief Act of 2003 Public Law 108-121, section 101 (117 Stat. 1335) (MFTRA). The MFTRA amends section 121 to provide that a taxpayer serving (or whose spouse is serving) on qualified official extended duty as a member of the uniformed services or Foreign Service may elect to suspend the running of the 5-year period for up to 10 years. The election may be made with respect to only one property at a time.

The taxpayer makes an election by filing a return for the taxable year of the sale or exchange of the taxpayer's principal residence that does not include the resulting gain in the taxpayer's gross income. A taxpayer who would qualify to exclude gain under section 121 as a result of the amendments made by the MFTRA but is barred by operation of any law or rule of law may nonetheless claim a refund or credit of an overpayment of tax if the taxpayer files the claim before November 11, 2004.

Section 1.121-3 of the final regulations, relating to the reduced maximum exclusion, applies to sales and exchanges on or after August 13, 2004. For sales or exchanges before August 13, 2004 and on or after May 7, 1997, taxpayers may elect to apply the rules retroactively in accordance with § 1.121-4(j) and will be afforded audit protection in accordance with § 1.121-4(k). Section 1.121-5 of the final regulations, relating to the suspension of the 5-year period for certain members of the uniformed services and Foreign Service, applies to sales and exchanges on or after May 7, 1997.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses.

The principal author of these regulations is Sara Paige Shepherd, Office of Associate Chief Counsel (Income Tax and Accounting). However, other personnel from the IRS and Treasury Department participated in the development of the regulations.

New Treasury Direct is an account-based, online, book-entry system for purchasing, holding, and conducting transactions in Treasury securities via the Internet. Treasury is offering to New Treasury Direct account holders a new security, a New Treasury Direct certificate of indebtedness (C of I), a non-interest bearing, short-term security whose sole purpose is to permit investors to accumulate the purchase price of other eligible Treasury securities in New Treasury Direct. Currently, electronic Series EE and Series I savings bonds are offered through New Treasury Direct. Until now, customers could only purchase these bonds by authorizing a debit of their financial institution checking or savings account for the full purchase price.

For many years, Treasury has also offered paper savings bond products through a payroll savings plan that permits investors to accumulate the purchase price of a savings bond over time through payroll deductions. Participating employers are responsible for accumulating and accounting for employees' deductions until they reach the full purchase price of a bond. The introduction of the C of I enables Treasury to provide an electronic alternative to the traditional payroll savings plan by permitting an account holder to purchase a non-interest bearing C of I as a means to accumulate the purchase price of an electronic security in New Treasury Direct. This greatly reduces the burden on employers, who will simply forward the deductions to Treasury via the ACH method. The cost of handling and accounting for deductions has often dissuaded businesses from offering a payroll deduction program for buying savings bonds. With this new feature, employees can direct their employers to send funds to their New Treasury Direct account to be invested in a C of I until they have accumulated the purchase price of other eligible securities.

The underlying principle of New Treasury Direct is to establish direct relationships with investors, enabling them to do business with Treasury online and conduct transactions without personal assistance from Treasury and its agents. The C of I supports Treasury's goal to provide the maximum convenience, flexibility, and investor self-sufficiency to New Treasury Direct investors. A C of I also allows account holders to consolidate funds from various sources for the purchase of another eligible security. A C of I is issued daily and has a one-day maturity with an automatic rollover at maturity, until the account holder redeems the C of I. The account holder may use the redemption proceeds to purchase an eligible security in New Treasury Direct, or may send the redemption proceeds by the ACH method to his or her account at a financial institution. The C of I is backed by the full faith and credit of the United States.

An account holder may purchase a C of I in four ways: (1) By directing his or her employer to send payroll funds to a New Treasury Direct account; (2) by directing his or her financial institution to send funds to his or her New Treasury Direct account; (3) by using the Buy Direct function of his or her New Treasury Direct account to authorize a debit from his or her account at a financial institution to purchase a C of I; and (4) by using the proceeds of a security redemption or payment to purchase a C of I.

The C of I expands the convenience and flexibility of New Treasury Direct and electronic securities for our customers. Employers will be able to significantly reduce their costs in administering savings bond payroll savings plans. The C of I also positions Treasury to offer customers a convenient way to reinvest interest or proceeds of maturing marketable securities when marketable securities are available in New Treasury Direct.

The account owner may direct purchases of securities to be paid for from his or her C of I holdings on a recurring basis or on a one-time basis. The account owner may redeem his or her C of I holdings, but may not transfer or deliver a C of I to another account owner (except to deliver a C of I from a minor linked account to the adult primary account of the former minor).

Upon the death of the account owner, his or her C of I will belong to the estate of the account owner. We will not be responsible for any redemptions of securities that were purchased using the redemption proceeds of a C of I after the death of the account owner prior to our receiving notice of the death.

The custodian of a minor may purchase a C of I within the minor's account. The minor's C of I is the property of the minor.

In addition, when the regulations for New Treasury Direct were first published, in 67 FR 64286 (October 17, 2002), we delayed the effective date for certain provisions in the rule. Certain functionalities of the system involving the granting of view and transact rights to other persons, and the ability to delete pending transactions, were not ready to be deployed at that time. In addition, the sections relating to minors were not ready to be deployed. By a later rule published at 69 FR 2507 (January 16, 2004), we deleted the delayed provisions relating to minors and replaced them with other provisions relating to minors that were effective upon publication. The remaining provisions with delayed effective dates become effective upon publication of this rule.

This final rule does not meet the criteria for a “significant regulatory action” as defined in Executive Order 12866. Therefore, a regulatory assessment is not required.

Because this final rule relates to matters of public contract and procedures for United States securities, notice and public procedure and delayed effective date requirements are inapplicable, pursuant to 5 U.S.C. 553(a)(2).

As no notice of proposed rulemaking is required, the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) does not apply.

We ask for no new collections of information in this final rule. Therefore, the Paperwork Reduction Act (44 U.S.C. 3507) does not apply.

FEMA makes the final determinations listed below of the modified BFEs for each community listed. These modified BFEs have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate has resolved any appeals resulting from this notification.

The modified BFEs are not listed for each community in this notice. However, this rule includes the address of the Chief Executive Officer of the community where the modified BFEs determinations are available for inspection.

The modified BFEs are made pursuant to Section 206 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq. , and with 44 CFR Part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required to either adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified BFEs, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by other Federal, State, or regional entities.

These modified BFEs are used to meet the floodplain management requirements of the NFIP and are also used to calculate the appropriate flood insurance premium rates for new buildings built after these elevations are made final, and for the contents in these buildings.

The changes in BFEs are in accordance with 44 CFR 65.4.

This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are required to maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This final rule is not a significant regulatory action under the criteria of Section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated October 26, 1987.

This rule meets the applicable standards of Section 2(b)(2) of Executive Order 12778.

The modified BFEs are not listed for each community in this interim rule. However, the address of the Chief Executive Officer of the community where the modified BFE determinations are available for inspection is provided.

Any request for reconsideration must be based upon knowledge of changed conditions, or upon new scientific or technical data.

The modifications are made pursuant to Section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq. , and with 44 CFR Part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required to either adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified elevations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by other Federal, State or regional entities.

The changes in BFEs are in accordance with 44 CFR 65.4.

This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are required to maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This interim rule is not a significant regulatory action under the criteria of Section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated Oct. 26, 1987.

This rule meets the applicable standards of Section 2(b)(2) of Executive Order 12778.

FEMA makes the final determinations listed below of modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Mitigation Division Director of the Emergency Preparedness and Response Directorate has resolved any appeals resulting from this notification.

The modified BFEs are not listed for each community in this notice. However, this rule includes the address of the Chief Executive Officer of the community where the modified base flood elevation determinations are available for inspection.

The modifications are made pursuant to section 206 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq. , and with 44 CFR part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required to either adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified elevations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by other Federal, state or regional entities.

These modified elevations are used to meet the floodplain management requirements of the NFIP and are also used to calculate the appropriate flood insurance premium rates for new buildings built after these elevations are made final, and for the contents in these buildings.

The changes in BFEs are in accordance with 44 CFR 65.4.

This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are required to maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated Oct. 26, 1987.

This rule meets the applicable standards of section 2(b)(2) of Executive Order 12778.

The modified BFEs are not listed for each community in this interim rule. However, the address of the Chief Executive Officer of the community where the modified BFE determinations are available for inspection is provided.

Any request for reconsideration must be based on knowledge of changed conditions or new scientific or technical data.

The modifications are made pursuant to section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq. , and with 44 CFR part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required to either adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified BFEs, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by the other Federal, State, or regional entities.

The changes BFEs are in accordance with 44 CFR 65.4.

This rule is categorically excluded from the requirements of 44 CFR Part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director for the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are required to maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This interim rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated Oct. 26, 1987.

This rule meets the applicable standards of section 2(b)(2) of Executive Order 12778.

The Federal Emergency Management Agency makes the final determinations listed below of BFEs and modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Mitigation Division Director of the Emergency Preparedness and Response Directorate has resolved any appeals resulting from this notification.

This final rule is issued in accordance with Section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and 44 CFR Part 67.

The Federal Emergency Management Agency has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR Part 60.

Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community.

The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.

This rule is categorically excluded from the requirements of 44 CFR Part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because modified base flood elevations are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are required to establish and maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This final rule is not a significant regulatory action under the criteria of Section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated Oct. 26, 1987.

This rule meets the applicable standards of Section 2(b)(2) of Executive Order 12778.

FEMA makes the final determinations listed below for the modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Mitigation Division Director of the Emergency Preparedness and Response Directorate, has resolved any appeals resulting from this notification.

This final rule is issued in accordance with Section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67.

The Agency has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.

Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community.

The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.

This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because final or modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and are required to establish and maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This final rule is not a significant regulatory action under the criteria of Section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated Oct. 26, 1987.

This rule meets the applicable standards of Section 2(b)(2) of Executive Order 12778.

FEMA makes the final determinations listed below for the modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Mitigation Division Director of the Emergency Preparedness and Response Directorate, has resolved any appeals resulting from this notification.

This final rule is issued in accordance with Section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR Part 67.

The Agency has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR Part 60.

Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community.

The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.

This rule is categorically excluded from the requirements of 44 CFR Part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because final or modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and are required to establish and maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This final rule is not a significant regulatory action under the criteria of Section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated Oct. 26, 1987.

This rule meets the applicable standards of Section 2(b)(2) of Executive Order 12778.

FEMA makes the final determinations listed below for the modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Mitigation Division Director of the Emergency Preparedness and Response Directorate, has resolved any appeals resulting from this notification.

This final rule is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67.

The Agency has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.

Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community.

The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.

This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. No environmental impact assessment has been prepared.

The Mitigation Division Director of the Emergency Preparedness and Response Directorate certifies that this rule is exempt from the requirements of the Regulatory Flexibility Act because final or modified BFEs are required by the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and are required to establish and maintain community eligibility in the NFIP. No regulatory flexibility analysis has been prepared.

This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

This rule involves no policies that have federalism implications under Executive Order 12612, Federalism, dated Oct. 26, 1987.

This rule meets the applicable standards of section 2(b)(2) of Executive Order 12778.