[Federal Register Volume 61, Number 139 (Thursday, July 18, 1996)]
[Proposed Rules]
[Pages 37628-37646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18227]



[[Page 37627]]


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Part III





Department of Agriculture





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Agricultural Marketing Service



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7 CFR Part 1005, et al.



Milk in the Carolina and Certain Other Marketing Areas; Tentative 
Decision on Proposed Amendments To Marketing Agreements and Orders; 
Proposed Rule

  Federal Register / Vol. 61, No. 139 / Thursday, July 18, 1996 / 
Proposed Rules  

[[Page 37628]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1005, 1007, 1011, and 1046

[Docket No. AO-388-A9, et al.; DA-96-08]


Milk in the Carolina and Certain Other Marketing Areas; Tentative 
Decision on Proposed Amendments To Marketing Agreements and Orders

------------------------------------------------------------------------
    7 CFR Part           Marketing area               Docket No.        
------------------------------------------------------------------------
1005                Carolina................  AO-388-A9                 
1007                Southeast...............  AO-366-A38                
1011                Tennessee Valley........  AO-251-A40                
1046                Louisville-Lexington-     AO-123-A67                
                     Evansville.                                        
------------------------------------------------------------------------

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This tentative partial decision proposes, on an emergency 
basis, amendments to four Federal milk orders in the Southeastern 
United States. The amendments would establish a transportation credit 
balancing fund from which to reimburse handlers for the cost of 
importing bulk milk into these markets for fluid use when milk supplies 
that are normally associated with these markets are insufficient to 
meet fluid needs. The amendments also would establish a monthly 
assessment to maintain the solvency of the fund and a methodology for 
computation of the transportation credits. The proposed rules are based 
upon proposals that were considered at a public hearing held May 15-16, 
1996, in Charlotte, North Carolina. Producers in the affected areas 
will have an opportunity to vote on the interim amendments before they 
go into effect.

DATES: Comments must be submitted on or before August 19, 1996.

ADDRESSES: Comments (4 copies) should be filed with the Hearing Clerk, 
Room 1083, South Building, United States Department of Agriculture, 
Washington, DC 20250.

FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist, 
Order Formulation Branch, USDA/AMS/Dairy Division, Room 2971, South 
Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 690-1932.

SUPPLEMENTARY INFORMATION: This administrative action is governed by 
the provisions of sections 556 and 557 of Title 5 of the United States 
Code and, therefore, is excluded from the requirements of Executive 
Order 12866.
    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires the 
agency to examine the impact of a proposed rule on small entities. 
Pursuant to 5 U.S.C. 605(b), the Agricultural Marketing Service has 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities. No new entities will be 
regulated as a result of the proposed rules and any changes experienced 
by handlers will be of a minor nature.
    The amended orders will promote orderly marketing of milk by 
producers and regulated handlers by providing transportation credits to 
assist them in bringing supplemental milk to the market for fluid use. 
The record of this proceeding indicates that supplemental milk is 
regularly imported into the Southeastern United States, that the burden 
of cost for providing this service has been increasing, and that it 
falls unevenly among the handlers and dairy farmers operating in these 
markets.
    There will be a modest assessment on handlers to provide funds for 
the proposed new transportation credits, which will be used to 
reimburse handlers for the costs that they incur, but this assessment 
will not exceed 6 cents per hundredweight of Class I producer milk. The 
assessment will be reduced or waived completely once the balance in the 
transportation credit balancing fund is sufficient to cover the sum of 
six months' credits. The 6-cent per hundredweight assessment translates 
to about one-half cent per gallon of milk.
    At present, all handlers regulated under the 4 milk orders involved 
in this proceeding file a monthly report of receipts and utilization 
with the market administrator. The proposed amendments resulting from 
this proceeding will only add 2 lines of information to this report. 
However, only those handlers applying for transportation credits on 
supplemental milk will have to provide this additional information to 
the market administrator. The estimated time to collect, aggregate, and 
report this information, which is already compiled for other uses, is 
less than 15 minutes per month.
    The net impact of the proposed amendments on dairy farmers should 
be insignificant. Some dairy farmers may experience a reduction in 
their blend price during the first year that the new rules are in 
effect. This reduction, which should amount to less than 5 cents per 
hundredweight, will occur only if the balance in the transportation 
credit balancing fund is insufficient to cover the current month's 
transportation credits. Once the fund has been fully endowed, dairy 
farmers would experience no reduction in the uniform price as a result 
of transportation credits.
    The preamble of this tentative decision clearly explains to all 
handlers and dairy farmers in these markets how the new provisions will 
work. The market administrator will send a copy of this decision to 
each handler, cooperative association, and nonmember dairy farmer 
covered by these orders. In addition, the market administrator's office 
is accessible by telephone for any additional questions that may arise 
during regular business hours.
    The amendments proposed herein have been reviewed under Executive 
Order 12778, Civil Justice Reform. This rule is not intended to have a 
retroactive effect. If adopted, this proposed rule will not preempt any 
state or local laws, regulations, or policies, unless they present an 
irreconcilable conflict with this rule.
    The Agricultural Marketing Agreement Act of 1937, as amended (7 
U.S.C. 601-674), provides that administrative proceedings must be 
exhausted before parties may file suit in court. Under section 
608c(15)(A) of the Act, any handler subject to an order may file with 
the Secretary a petition stating that the order, any provision of the 
order, or any obligation imposed in connection with the order is not in 
accordance with the law and request a modification of an order or to be 
exempted from the order. A handler is afforded the opportunity for a 
hearing on the petition. After a hearing, the Secretary would rule on 
the petition. The Act provides that the district court of the United 
States in any district in which the handler is an inhabitant, or has 
its principal place of business, has jurisdiction in equity to review 
the Secretary's ruling on the petition, provided a bill in equity is 
filed not later than 20 days after the date of the entry of the ruling.
    Prior documents in this proceeding:
    Notice of Hearing: Issued May 1, 1996; published May 3, 1996 (61 FR 
19861).

Preliminary Statement

    A public hearing was held to consider proposed amendments to the 
marketing agreements and the orders regulating the handling of milk in 
the aforesaid marketing areas. The hearing was held pursuant to the 
provisions of the Agricultural Marketing Agreement Act of 1937, as 
amended (7 U.S.C. 601-674), and the applicable rules of practice (7 CFR 
Part 900), in Charlotte, North Carolina, on May 15-16, 1996. Notice of 
such hearing was issued on May 1,

[[Page 37629]]

1996, and published May 3, 1996 (61 FR 19861).
    Interested parties were given until May 28, 1996, to file post-
hearing briefs on the proposals as published in the Federal Register 
and as modified at the hearing. Comments also were requested on whether 
the proposals should be considered on an emergency basis.
    Interested parties may file written exceptions to this tentative 
decision with the Hearing Clerk, U.S. Department of Agriculture, 
Washington, DC 20250 by the 30th day after publication of this decision 
in the Federal Register. Four copies of the exceptions should be filed. 
All written submissions made pursuant to this notice will be made 
available for public inspection at the Office of the Hearing Clerk 
during regular business hours (7 CFR 1.27(b)).
    The material issues on the record of the hearing relate to:
    1. Transportation credits for supplemental bulk milk received for 
Class I use.
    2. Deductions from the minimum uniform price to producers.
    3. Whether emergency marketing conditions in the 4 regulated 
marketing areas warrant the omission of a recommended decision with 
respect to Issue No. 1 and the opportunity to file written exceptions 
thereto.
    This tentative partial decision only deals with Issues 1 and 3. 
Issue 2 will be handled through normal rulemaking procedures in a 
forthcoming recommended decision.

Findings and Conclusions

    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof:

1. Transportation Credits for Supplemental Bulk Milk Received for Class 
I use

    Federal Milk Orders 1005, 1007, 1011, and 1046 (hereinafter 
referred to as ``the 4 orders'') should be amended to provide a 
transportation credit for supplemental bulk milk that is transferred 
from an other order plant to a pool plant during the months of July 
through December. A credit also should be provided to those handlers 
who import supplemental bulk milk for fluid use directly from 
producers' farms. For plant milk, the credit should be limited to milk 
that is allocated to Class I and should be computed at a rate equal to 
3.7 cents per 10 miles per cwt. or fraction thereof from the transferor 
plant to the transferee plant. The credit should be reduced to the 
extent that the Class I price at the transferee plant exceeds the Class 
I price at the transferor plant.
    In the case of milk received directly from producers' farms, the 
origination point of a bulk tank truck containing more than one 
producer's milk should be the city closest to the farm from which the 
last farm pickup was made. Alternatively, the origination point may be 
the location specified on a certified weight receipt obtained at an 
independently operated truck stop after the last farm pickup has been 
made. The credit should be computed by multiplying 3.7 cents times the 
number of 10-mile increments between the origination point and the 
location of the plant receiving the milk, less any positive difference 
in the Class I prices at the two points under the order receiving the 
milk.
    A transportation credit for bulk milk received from an other order 
plant for Class I use was proposed by Mid-America Dairymen, Inc., a 
cooperative association that represents approximately 50 percent of the 
producers in Orders 5, 7, and 11, and nearly one-third of the producers 
in Order 46.
    A spokesman for Mid-Am testified that: (a) The Southeast states are 
chronically short of milk for fluid use at certain times of the year 
and this shortage will be particularly acute during the upcoming summer 
and fall months; (b) the Federal order Class I pricing structure will 
not accommodate the movement of milk from surplus markets to deficit 
markets; (c) the burden of supplying the 4 Southeast markets with 
supplemental milk for fluid use falls disproportionately on the 
cooperative associations serving these markets; (d) the Agricultural 
Marketing Agreement Act provides for ``marketwide service payments'' to 
provide for greater equity between producers and handlers supplying a 
market with supplemental milk during short production months; and (e) 
therefore, the Secretary should immediately amend the 4 orders 
effective July 1, 1996, to provide relief to those handlers who will be 
relied upon to provide supplemental milk to meet the fluid needs of 
consumers in the area.
    The General Manager of Carolina Virginia Milk Producers Association 
(CVMPA), a cooperative association with producers supplying plants 
regulated under all 4 orders, testified in support of Mid-Am's proposed 
transportation credits but stated that the proposal should be expanded 
to include supplemental milk received directly from producers' farms. 
The spokesman testified that during the period from July through 
December 1995, CVMPA imported more than 19 million pounds of plant milk 
at a transportation cost of 307 thousand dollars. During that same 
period, however, CVMPA imported more than 38 million pounds of 
supplemental producer milk directly from farms at a cost of 528 
thousand dollars, he said.
    The CVMPA spokesman testified that supplemental milk shipped 
directly from producers' farms can often be purchased at lower cost 
than plant milk. He also noted that this farm-shipped milk is often of 
better quality because it requires less handling. He concluded that the 
orders should be amended to give handlers the economic incentive to 
transport milk in the most efficient manner.
    A spokesman for Milk Marketing, Inc. (MMI), a cooperative 
association supplying handlers under Orders 11 and 46, testified in 
opposition to the Mid-Am proposal as it relates to Order 46. The MMI 
spokesman stated that MMI opposed the proposal on the basis that over-
order charges would be a better method of obtaining reimbursement for 
the costs associated with importing milk into the market for fluid use. 
Also, he said that MMI did not support the proposal because it did not 
provide a transportation credit for bulk supplemental milk shipped 
directly from producers' farms to plants. However, he said that if the 
Department should adopt Mid-Am's proposal, it should be expanded to 
include supplemental milk received directly from producers' farms. 
Receiving milk in this manner, he explained, would encourage hauling 
efficiencies, improve milk quality, eliminate pump-over expenses, and 
reduce product loss due to handling.
    Select Milk Producers, Inc., a New Mexico dairy cooperative that 
provides supplemental milk to the Southeast markets, endorsed the 
suggestion of CVMPA and MMI to provide transportation credits for farm-
to-plant milk as well as plant-to-plant milk.
    The Mid-Am proposal also received a qualified endorsement from 
Fleming Dairy. The spokesman for Fleming, which operates pool 
distributing plants in Nashville, Tennessee, and Baker, Louisiana, 
suggested that Mid-Am's proposal be modified to restrict transportation 
credits to the months of July through October instead of July through 
December. He also suggested eliminating the provision proposed by Mid-
Am that would permit credits during the months of January through June 
if the Class I utilization during the month is higher than 80 percent.

[[Page 37630]]

    The Fleming spokesman stated that during the months when 
transportation credits are in effect, Class III-A pricing in these 
markets and in the surrounding markets should be suspended. At the 
present time, he said, the presence of Class III-A pricing in these 
markets significantly adds to the cost of obtaining supplemental milk 
because cooperatives and fluid milk processors have to bid this 
supplemental milk away from butter-powder plants.
    A spokesman for Land O' Sun Dairies, Kingsport, Tennessee, Milkco, 
Inc., Asheville, North Carolina, and Hunter Farms, Charlotte and High 
Point, North Carolina, also offered constructive criticism of the Mid-
Am proposal. The spokesman suggested that handlers seeking 
reimbursement for transportation costs should be required to show that 
they, in fact, incurred the cost. If the actual transportation cost was 
less than the credit provided in the order, a handler should only 
receive reimbursement for the cost actually incurred. He also 
questioned whether the proposed 3.9 cents per 10 miles accurately 
represented the cost of transporting bulk milk and he criticized the 
proposal for not restricting transportation credits on the movement of 
bulk milk between the 4 orders involved in this proceeding. Finally, 
the witness suggested borrowing funds from the producer-settlement fund 
reserve, instead of the marketwide pool, when the proposed 
transportation credit balancing fund contains an insufficient balance 
to cover a month's transportation credits.
    Several proprietary handlers testified in opposition to the 
proposed transportation credits. The president of Southern Belle Dairy, 
Somerset, Kentucky, stated that handlers make choices in arranging for 
their milk supplies and the Federal order program should not be called 
upon to ``absolutely level the playing field.'' He said the proposed 6-
cent assessment for the transportation credit balancing fund would put 
Southern Belle at a competitive disadvantage with its competitors in 
Indiana, Virginia, West Virginia, and Ohio. He also stated that it will 
promote inefficient movements of milk by giving regional cooperatives 
the opportunity to divert regional milk supplies to Florida and then 
replace those supplies with supplemental milk at handlers' expense. 
Finally, he criticized the proposal for not including the suspension of 
Class III-A pricing.
    The Director of Milk Procurement for Dean Foods Company, Franklin 
Park, Illinois, also testified in opposition to the Mid-Am proposal. He 
said that negotiation between buyer and seller was the best vehicle to 
recover costs and that proprietary handlers that purchase all or part 
of their milk supply from independent producers should not be expected 
to pay into a transportation pool to assure a milk supply for 
processors who choose to purchase their milk from a ``marketing 
agency.'' The proposed amendments, he said, could create false 
shortages and force fluid processors to make unnecessary payments into 
a transportation pool for the sole benefit of cooperatives.
    The vice president of finance for Holland Dairies, Holland, 
Indiana, also testified in opposition to the proposal. The witness 
stated Holland Dairies has developed its own milk supply from 
independent producers and, as a result, carries the risk of balancing 
this milk supply during the flush and short seasons of production. He 
said that while the proposed transportation credits would cost Holland 
Dairy a considerable amount of money, it would provide no apparent 
benefit to Holland Dairy. He concluded that suppliers of milk in the 
Southeast voluntarily chose to do business in that region and should 
therefore be required to manage their business accordingly.
    Briefs. Several briefs were filed following the hearing. A brief 
from the Kroger Company indicates Kroger's opposition to the 
transportation credit proposal. Kroger states in its brief that ``* * * 
a temporary situation should not be used as justification for a 
permanent change in the order which would allow the use of pool money 
to cover the cost of transportation * * * the current system has worked 
in the past and will continue to do so in the future.''
    Holland Dairies, Inc., in its brief, reiterated its opposition to 
the transportation credit proposal. Holland stated that ``it is 
completely unfair to independent handlers and processors to legislate 
that they are required to pay into a fund that only a cooperative can 
draw funds from.'' (It appears from this statement that Holland has 
misconstrued the proposal. As proposed, and as adopted herein, 
transportation credits would be available to any handler that brings 
supplemental milk into the market. Accordingly, should Holland Dairy 
run short of milk during the months of July through December, it could 
import milk from Wisconsin or Michigan, for example, and receive a 
transportation credit for such milk.)
    While conceding that the Southeast has always been in a deficit 
position, Holland maintains that handlers should pay for supplemental 
milk through premiums outside of the order. Holland is also concerned 
that stair stepping of milk to markets farther south will occur and 
that normal deliveries should be excluded from receiving a 
transportation credit.
    Holland also argues in its brief that handlers should have a choice 
of buying milk from a cooperative association or from independent 
producers. It states that the proposed transportation credits would 
eliminate this choice.
    Holland contends that Order 46 should not be part of the proposed 
transportation credit because it is far removed from deficit areas in 
Georgia and Florida. Finally, it states that if a transportation credit 
is implemented, it should not apply for the first 250 miles.
    A brief filed on behalf of the Fleming Company states that the 
proposed transportation credits are compellingly supported by the 
evidence in this proceeding. Fleming, however, reiterates its 
suggestion that the credits be limited to the months of July through 
October and suggests a further limitation based upon mileage or source 
of supply. The handler again expresses a concern about Class III--A 
pricing and suggests that it be suspended when supplemental milk is 
needed in the Southeast. Fleming urges the Secretary to act on an 
emergency basis to adopt the proposal.
    A brief was also filed on behalf of Land O' Sun Dairies, Milkco, 
Inc., and Hunter Farms. The plants of these handlers are regulated 
under Orders 5 and 11.
    These handlers note in their brief that ``the record discloses a 
disturbing trend in raw milk production and fluid consumption in the 
Southeastern United States * * * raw milk production has not been 
keeping pace with consumption in the Southeast.'' While desiring to 
maintain a local dairy industry in the Southeast, they recognize that 
``some considerations must be made for obtaining fluid milk supplies 
from non-local sources when that milk is needed.''
    The brief of these handlers indicates that they are not opposed to 
adoption of a modified transportation credit proposal. They are 
concerned, however, that the provision not be abused. For this reason, 
they offer several suggestions to prevent abuse. One suggestion is to 
exclude bulk shipment of milk between the 4 orders from receiving any 
transportation credits. (This suggestion has been adopted in this 
decision.)
    Another suggestion of these handlers is to establish historical 
movements of milk from these 4 orders to the 3 Florida orders. If a 
handler or a cooperative association shipped anything more than these 
historical shipments to Florida

[[Page 37631]]

and, at the same time, imported milk into the market from which these 
Florida shipments originated, the new or replacement milk would not 
qualify for a transportation credit.
    These 3 handlers state that they are opposed to a provision in the 
Mid-Am proposal that would permit transportation credits during the 
months of January through June if a market's Class I utilization 
exceeds 80 percent. The basis for their opposition, according to their 
brief, is that some parties may try to manipulate the Class I 
utilization in one or more of these markets, causing some handlers to 
pay an assessment for transportation credits while their competitors in 
one or more of the other 4 markets involved in this proceeding do not.
    Taken to its logical conclusion, the position of these 3 handlers 
seems to be that this provision should be administered as if the 4 
separate markets were, in fact, one market. This would have to be so 
because the only way that the assessment for the transportation credits 
can be uniform among the 4 individual orders is if the transportation 
credits given out each month are proportionately the same in each 
market. It is unlikely that this will be the case since the Class I 
utilization does vary among the 4 markets. It is conceivable that 
during some months Orders 5, 7, or 11 may need supplemental milk, while 
Order 46 may not. Thus, transportation credits and assessments for 
transportation credits would be applicable under Orders 5, 7, and/or 
11, but not Order 46.
    The 3 handlers also state that transportation credits should not 
apply for the first 100 miles of shipment and that the credit should be 
something less than the proposed 3.9 cents per 10 miles. They also 
suggest borrowing money from the producer-settlement fund reserve, 
rather than the producer-settlement fund itself, when transportation 
credits exceeds the available funds in the transportation credit 
balancing fund. In support of this idea, they state that local milk 
production has suffered enough and payments to producers should not be 
reduced further by taking money out of the producer-settlement fund.
    The brief of the 3 handlers supports the proposal of CVMPA to allow 
farm-to-plant supplemental milk to qualify for a transportation credit. 
However, they suggest limiting this milk to dairy farms located outside 
of the 4 marketing areas.
    Finally, the 3 handlers express their concern about the possible 
exclusion of Order 46 from the transportation credit proposal. If this 
were to happen, they state, it would disrupt the competitive 
relationship among competing handlers in Orders 5, 11, and 46.
    A brief was received on behalf of Select Milk Producers (SMP), a 
cooperative association based in Artesia, New Mexico. The brief states 
that SMP expects to market milk in the Southeast marketing area in the 
fall of 1996 and therefore requests that transportation credits be 
extended to farm-to-plant milk as well as to plant-to-plant milk.
    SMP states that they concur with MMI's suggestion regarding the 
application of transportation credits for farm-to-plant supplemental 
milk. SMP suggests that supplemental milk be defined as milk that was 
not associated with any of the 4 markets during the prior months of 
January through July.
    Southern Belle Dairy, Somerset, Kentucky, reiterated their 
opposition to the transportation credit proposal for Order 11 in its 
brief. Southern Belle states that it bears the full cost of its milk 
supply and that it has made private arrangements to solve any problem 
that might arise. It also contends that the proposal would reduce their 
competitive relationship vis-a-vis handlers in other markets and that 
the Tennessee Valley order does not need the transportation credits. 
Finally, it states that Florida is an integral part of the deficit 
problem in the Southeast and, accordingly, should be included in the 
solution to the problem.
    Southern Belle concludes that the proposed transportation credits 
are simply a money-shifting scheme whereby dairies such as itself that 
have developed an independent supply of milk over a long period of time 
will be forced to subsidize other dairies who have not invested in 
these relationships which would ensure a steady supply of milk.
    Gold Star Dairy, Little Rock, Arkansas, also filed a brief in 
opposition to the proposed transportation credits. This handler 
maintains that there is no need for supplemental milk in the western 
part of the Southeast market, and that, in those parts of the marketing 
area where supplemental milk is being brought in, cooperatives are now 
being compensated through over-order charges.
    Gold Star argues that it has little in common with plants in the 
eastern part of the marketing area; it does not share a common supply 
area with them; it is only technically part of the Southeast market 
because it is within the defined marketing area; it is already paying 
for marketwide services through over-order charges; and that if, 
notwithstanding these arguments, the Secretary should adopt the 
proposed transportation credits, the assessment to fund the credits 
should not be based on Class I sales made outside the marketing area.
    In its brief, Carolina-Virginia Milk Producers Association offers 
several suggestions for implementing its modified proposal, which would 
provide transportation credits for supplemental milk supplied to the 
market directly from producers' farms. The cooperative supports a 
prohibition on credits for milk moving between the 4 markets, as well 
as the proposed hauling rate of 3.9 cents per 10 miles. CVMPA also 
endorses a suggestion made at the hearing to borrow funds from the 
producer-settlement fund reserve, rather than the producer-settlement 
fund itself, when there are insufficient funds in the transportation 
credit fund to cover a current months' credits. It states that the 
reserve fund could be paid back in future months for the money that is 
borrowed.
    With respect to the mechanics of providing transportation credits 
for farm-to-plant milk, CVMPA suggests defining ``supplemental milk'' 
as the milk of dairy farmers which is pooled only during the period of 
market shortage. Specifically, it suggests that transportation credits 
not be available to a dairy farmer who was a producer on any of the 4 
markets ``for more than 35 days during more than 8 months in the 
previous July-June period.''
    To determine the origination point for farm-to-plant milk, CVMPA 
suggests using the county courthouse closest to the farm of the last 
producer whose milk is on the load. It also suggests subtracting any 
positive difference between the Class I price at the receiving pool 
plant and the Class I price at the origination point in computing the 
net transportation credit. This treatment would make the transportation 
credit computation virtually identical for transfers of plant milk and 
direct farm-to-plant deliveries.
    Finally, CVMPA suggested the requirement that receiving handlers 
provide the market administrator with a list of the producers for whom 
transportation credits are requested.
    Milk Marketing, Inc., filed a brief reiterating its opposition to 
the transportation credit proposal for Order 46 only. It maintains that 
over-order pricing is the best method for handling additional costs 
associated with importing milk to the market for fluid use. MMI states 
that if the Department should nevertheless adopt a transportation 
credit provision for Order 46, the provision should include an 
extension of the credit to cover supplemental milk shipped directly 
from farm to plant. Several of the

[[Page 37632]]

safeguards mentioned in the brief are similar to those already 
described with respect to CVMPA's brief.
    Mid-America Dairymen, Inc., submitted a lengthy brief setting forth 
the historical background for the hearing, pertinent facts and figures 
brought out in the hearing record, the legislative history for the 
marketwide service payment provision contained in the Agricultural 
Marketing Agreement Act, a review of past agency decisions concerning 
transportation credits, and a comprehensive review of the arguments 
supporting its proposal.
    Several points brought out in Mid-Am's brief are particularly 
noteworthy and should be emphasized. Mid-Am points out once again that 
a disproportionate share of the supplemental milk that is brought into 
the Southeast markets is brought in by the cooperative associations 
serving these markets. It argues that the costs incurred in importing 
this milk cannot simply be passed on to their customers because it 
would put these customers at a competitive disadvantage with other 
handlers who are fortunate enough to have adequate supplies of locally-
produced milk to meet their needs.
    Mid-Am contends that the cost of supplying these markets with 
surplus milk puts their member producers at a disadvantage compared to 
non-member producers who do not share in this cost. The cooperative 
also points out that when these markets are short of milk, it shuts 
down its manufacturing plants, which adds to its cost. It notes, for 
instance, that during the months of July through December 1995, it shut 
down its facilities in Louisville, Kentucky, Lewisburg, Tennessee, and 
Franklinton, Louisiana.
    In its review of the legislative history of the Food Security Act 
of 1985, the foundation for the marketwide service provision in 
Sec. 608c(5)(J) of the Act, Mid-Am notes that Congress sought to 
achieve equity between producers or handlers who bear service costs 
that benefit the market and those who do not. It included an excerpt 
from one of the committee reports (reprinted at 1985 U.S. Code 
Congressional and Administrative News 1103), which appears to be 
particularly relevant to the proposal at hand. It reads: ``* * * At the 
moment, there are three major problems with respect to the operation of 
the Federal order systems: (1) minimum Federal order Class I prices are 
not adequate to attract the necessary supply to meet the Class I needs 
in deficit areas; (2) handlers who must go outside their territory to 
acquire additional milk incur greater costs for milk than handlers who 
obtain all of their milk from the local area; and (3) those producers 
who assume the responsibility of supplying the needs of the market have 
to pay the cost of transporting supplemental milk, resulting in 
producers not receiving uniform prices.'' Mid-Am argues that its 
proposal for transportation credits conforms to the equity-promoting 
goals described in the legislative history.
    Mid-Am also argues that its proposal conforms with past agency 
decisions. Among many quotes included in its brief is the following 
from a final decision issued October 8, 1987, incorporating permanent 
transporting credits in the Chicago Regional order (52 FR 38240): ``* * 
* a major purpose of the order program is to assure an adequate supply 
of pure and wholesome milk for the fluid market and to establish and 
maintain orderly marketing conditions. This includes adopting order 
provisions to facilitate securing adequate supplies of milk to meet the 
market's fluid needs. The record shows that obtaining adequate milk for 
those needs is not being accomplished in an orderly and equitable 
fashion under the current order provisions.''
    Mid-Am states that the suggested modifications of MMI and CVMPA to 
provide transportation credits for farm-to-plant milk should be given 
favorable consideration by the Secretary. It urges the Secretary to 
incorporate appropriate safeguards, however, to ensure that no 
artificial economic advantage is created for supplies that are not 
normally associated with the market.
    Mid-Am notes that the supply/demand situation in the Southeast has 
become particularly acute in recent months. It emphasizes that the 
shortage this summer and fall will likely be even worse than in 1995, 
pointing to reduced production during the first 4 months of 1996, 
compared to a year earlier, especially in Tennessee and Kentucky, 2 
important supply areas for the Southeast. It also notes that the 
Olympic Games that will be held in Atlanta this summer will likely 
increase consumer demand for fluid milk. It urges the Secretary to 
issue an expedited decision that would allow the transportation credits 
to be effective by July 1, 1996.
    Conclusion. Testimony and exhibits introduced at the hearing 
indicate that the Southeastern United States has a chronic shortage of 
milk for fluid use in the summer and fall months, which often extends 
into the winter months. This shortage has been worsening over time as 
milk production has declined and population has increased, and this 
trend is likely to continue, exacerbating the problem of obtaining a 
sufficient supply of milk for fluid use in an orderly and equitable 
manner. Under current arrangements, the costs of obtaining an 
increasing supply of supplemental milk are not being borne equally by 
all handlers and producers in each of the 4 orders. The service 
provided by handlers, particularly, cooperative associations, in 
obtaining sufficient supplies of milk is a service of marketwide 
benefit for which the Secretary is authorized to include provisions in 
Federal milk orders to compensate handlers. The record of this hearing 
demonstrates that disorderly marketing conditions exist because of the 
significantly different costs that are incurred by handlers who provide 
the additional service versus those who do not. The increasing 
magnitude of the disproportionate sharing of costs is jeopardizing the 
delivery of adequate supplies of milk for fluid use. Thus, the record 
justifies the adoption of these provisions to restore stability and 
order in providing adequate supplies of milk for fluid use for Orders 
5, 7, 11, and 46, as explained below.
    Data in the record of this hearing show that the area covered by 
Orders 5, 7, 11, and 46 is a highly seasonal, deficit milk production 
area. As shown in Table 1, milk production in the 12 Southeast states 
of Arkansas, Louisiana, Mississippi, Tennessee, Kentucky, Alabama, 
Georgia, Florida, South Carolina, North Carolina, Virginia, and West 
Virginia has fallen from 15.4 billion pounds in 1988 to 14.5 billion 
pounds in 1995. Based upon this trend, production in the year 2000 is 
expected to be 13.1 billion pounds.

Table 1.--Milk Production and Population in 12 Southeastern States 1988-
                                  2010                                  
------------------------------------------------------------------------
                  Year                    Population   Production (lbs.)
------------------------------------------------------------------------
1988...................................    57,961,000     15,432,000,000
1989...................................    58,732,000     15,356,000,000
1990...................................    59,266,000     15,505,000,000
1991...................................    60,265,000     15,362,000,000
1992...................................    61,090,000     15,499,000,000
1993...................................    61,926,000     15,310,000,000
1994...................................    62,767,000     14,994,000,000
1995...................................    63,573,000     14,554,000,000
2000...................................    66,876,000     13,114,000,000
2005...................................    70,471,000     11,603,000,000
2010...................................    74,066,000     10,092,000,000
------------------------------------------------------------------------

Source: Population--U.S. Bureau of the Census.
Milk Production--Milk Production, NASS, USDA, Washington, DC.

    The bar graph below compares quarterly production in the 12 
Southeastern states during the past 4 years. It shows that quarterly 
production is down from the previous year's quarter

[[Page 37633]]

for the past 4 years. The graph also shows that not only has production 
decreased for 4 consecutive years, but that such decreases have 
occurred at an accelerating rate. Furthermore, the graph demonstrates 
that the degree of seasonality between the relatively flush and short 
production months has also been increasing.

BILLING CODE 3410-02-P

[[Page 37634]]

      
    [GRAPHIC] [TIFF OMITTED] TP18JY96.000
    

BILLING CODE 3410-02-C

[[Page 37635]]

    While production in the Southeast has been declining, the 
population of this area has been rising. As shown in Table 1, the 
population of the 12 Southeastern states rose from 57.9 million in 1988 
to 63.5 million in 1995. By the year 2000, population is expected to 
reach 66.8 million.
    Data in the record indicates that the per capita consumption of all 
dairy products in the 12 Southeastern states has grown in the past 7 
years, from 568 pounds (milk equivalent) per capita in 1988 to 582 
pounds in 1995. Conservatively estimating no growth in the per capita 
consumption of fluid milk products in the next 10 years, the deficit in 
Southeast milk production will grow significantly based upon population 
growth alone. According to Census Bureau data, 16 states will gain more 
than 1 million persons by the year 2020; 7 of these states are covered 
at least in part by the milk orders involved in this proceeding. There 
clearly is no question concerning the continuing--and, in fact, 
growing--need to import supplemental milk into the Southeastern United 
States for fluid use.
    The record shows that the production decline and the population 
increase has resulted in an increasing Class I utilization in these 4 
markets. During the period from April 1995 to April 1996, producer milk 
pooled under the 4 orders decreased by 42 million pounds. At the same 
time, the Class I utilization of producer milk under the 4 orders 
increased by almost 13 percentage points to 77.5 percent. It 
undoubtedly would have increased even more except for the fact that the 
milkshed continues to expand in a northerly and westerly direction to 
more and more distant farms. In this regard, it should be noted that 
milk has been regularly flowing into the Southeast markets from Texas 
and New Mexico, and there are indications that such shipments will 
start sooner than ever this summer.
    These markets are tightest during the late summer and fall months. 
The Class I utilization reached 86.1%, 85.5%, 83.7%, and 80.2% in 
Orders 5, 7, 11, and 46, respectively, during August 1995. This 
compares to 84.0%, 83.3%, 85.1%, and 73.8%, respectively, one year 
earlier. Percentages of this magnitude indicate a very tight market 
situation when taking into consideration the bottling schedule of fluid 
milk plants, the desire of handlers to make some Class II products 
locally, and the unavoidable need to process some local milk into 
storable manufactured products, particularly on weekends when it is not 
needed for fluid use.
    It is impossible to reveal precisely the total amount of 
supplemental milk needed by these markets because of restrictions on 
the release of confidential data (i.e., data represented by less than 3 
handlers). In addition, much of the supplemental milk that is needed 
entered these markets directly from the farms of dairy farmers who are 
not regular suppliers of these markets. With these shortcomings taken 
into consideration, market administrator data entered in the record for 
Orders 5, 11, and 46 show that bulk receipts of other order milk for 
Class I use increased from 13.1 million pounds in 1993 to 49.6 million 
pounds in 1995. For these 3 markets, the data also show that first 
quarter receipts of bulk other order milk for Class I use is running at 
more than 10 times the level of 1995.
    It is difficult to compare similar data for Order 7 to earlier 
periods because several markets were merged into the present Southeast 
marketing area in July 1995. Thus, shipments which formerly would have 
been other order bulk transfers are now transfers between pool plants 
within the order. Nevertheless, treating the merged order as if it were 
still 5 separate orders and comparing the other order bulk receipts for 
Class I use in 1995 to 1993 indicates a more than twofold increase in 
such receipts.
    Data entered into the record by Mid-Am shows that during the months 
of July through December 1995 more than 100 million pounds of other 
order bulk receipts were transferred into Orders 5, 7, 11, and 46. 
According to Mid-Am, the cooperative also brought in supplemental 
producer milk on a direct-ship basis. The record data also show that 
while Mid-Am represents 47 percent of the producer milk pooled under 
the 4 markets, it accounted for more than 70 percent of the other order 
bulk milk that was brought into these markets during the months of July 
through December 1995.
    Exhibits entered by CVMPA show that the cooperative imported more 
than 19 million pounds of other order plant milk during the months of 
July through December 1995, while at the same time bringing in more 
than 38 million pounds of supplemental milk directly from producers' 
farms. The exhibits show that the transportation cost for these 
supplemental purchases were nearly one million dollars.
    A detailed breakdown of Mid-Am's interorder transfers during the 
months of July and August 1995 shows the location of the transferor 
plant and the transferee plant, the mileage between the two plants, the 
total cost of hauling the milk, and the freight rate broken down into 
10-mile increments. During July and August 1995, the exhibit shows that 
the average hauling cost for this milk was 3.7 cents per 10 miles.
    The Mid-Am spokesman testified that Mid-Am was proposing a hauling 
credit of 3.9 cents per 10 miles due to increasing fuel costs in recent 
months, justifying a slightly higher credit.
    After carefully reviewing the record testimony and data, it is 
concluded that a transportation credit for supplemental milk during the 
seasonally short period of July through December is fully justified for 
this year's milk shortage and on a continuing basis, as needed, for 
future years. Such a credit will restore market order and provide the 
opportunity for all handlers to bring in supplemental milk when needed 
for fluid use.
    While handlers opposed to the incorporation of these credits in the 
orders argue that reimbursement for transportation costs should be 
handled outside the order, experience has shown that this is not always 
possible. The absence of reimbursement for the costs of providing 
supplemental milk by cooperatives in this area last summer and fall 
demonstrate very well what can happen in a competitive market 
situation. Over-order pricing does not always ensure either stability 
or uniform costs among handlers. Also, premiums can disappear as 
quickly as they are introduced even when markets are desperately short 
of milk because of the pressure to maintain uniform costs among 
competing handlers.
    Over-order pricing has been used in these markets in the past to 
equalize costs among handlers, but the industry was much different than 
it is today. There are now far fewer, but larger, fluid processing 
plants operating in these markets, creating daily and weekly demands to 
which the market's suppliers must react. On the supply side, the number 
of cooperative associations has decreased dramatically in the last 
decade. Consequently, only a few organizations are incurring costs in 
providing balancing services for these markets and the amount of milk 
being handled is far greater than the quantity of milk handled by any 
single cooperative in prior years. For this reason, it is imperative 
that the cooperatives and handlers providing balancing services for the 
benefit of the entire market be fairly compensated for these costs to 
ensure that an adequate supply of milk is available for fluid use.
    In fact, the current market is not meeting the standard of orderly 
marketing. Markets which, at times, are short of milk must have some 
structure to provide for sharing the costs in the movement of 
supplemental milk to processors. Otherwise, orderly

[[Page 37636]]

marketing conditions can deteriorate and all handlers will not be 
competing for a supply of milk on an equal footing.
    Under current market conditions, producers supplying these markets 
are also negatively affected. Producers who are members of cooperative 
organizations incurring the costs of supplemental milk are forced to 
bear the costs unfairly relative to nonmember producers.
    The Agricultural Marketing Agreement Act recognized that disorderly 
markets can occur in a market when there are no standards which all 
segments of the market must satisfy. In this case, such standards must 
apply to all milk supplied to the regulated market. When the market 
fails to provide this equity, it becomes necessary for the order 
structure to provide the system.
    As indicated, over-order premiums may be used to serve this 
purpose. This record clearly indicates, however, that such is not the 
case in these markets. The record, in fact, clearly indicates that the 
supplemental milk supplies, as they are currently being handled, are 
creating disorder. It is, therefore, proper that the regulations be 
amended to restore order to the system by equitably allocating the 
costs associated with obtaining supplemental milk supplies.
    The adoption of transportation credits will enable handlers to make 
decisions involving supplemental milk supplies with a greater degree of 
certainty and be assured that the equity required by the Act is 
provided.
    Congress recognized the inequities that can and do occur in 
supplying markets with supplemental milk and provided the Secretary of 
Agriculture with certain tools to handle these problems. The record of 
this hearing clearly demonstrates a need for these remedies in the 4 
orders involved in this proceeding. Moreover, the production and 
population statistics justify the incorporation of these tools on a 
permanent basis so that they can be used when needed. The alternative 
approach, which some handlers appear to favor, is to hold a hearing and 
temporarily amend the orders each time a crisis occurs. However, as 
last fall's crisis demonstrated, it is very difficult to hold hearings 
and amend orders after these problems already have occurred. It is much 
better to anticipate the problems and have provisions that can be used 
as needed. Accordingly, the permanent incorporation of provisions to 
facilitate the importation of supplemental milk to these deficit 
markets is the most prudent course of action to follow and is fully 
supported by the record of this hearing.
    The amendments adopted in this tentative decision are similar to 
those proposed by Mid-Am, but also differ in several respects. First, 
the transportation credits should be limited to the months of July 
through December. It should not include other months when the Class I 
utilization is over 80 percent because handlers would not know until 
after the month is over whether or not they would be eligible for a 
transportation credit on bulk milk brought into the market.
    A better approach during the months of January through June would 
be to simply give the market administrator the authority to expand the 
transportation credit period if market conditions indicate that 
producer milk for Class I use will be in short supply and the 
marketwide Class I utilization is likely to exceed 80 percent. The 
market administrator is in an excellent position to review such a 
request, which should be made in writing at least 15 days prior to the 
beginning of the month for which it is to be effective.
    Upon receiving a request to extend the transportation credit 
period, the market administrator will notify the Director of the Dairy 
Division and all handlers in the market that an extension is being 
considered and invite written data, views, and arguments. The market 
administrator's notice to interested parties also may invite comments 
on other remedies that may be available including, but not limited to, 
an increase in the supply plant shipping percentage as provided in 
Secs. 1005.7(b), 1007.7(f), and 1011.7(b)(4) and, in the case of Order 
7, the desirability of adjusting diversion limitations as provided in 
Sec. 1007.13(d)(9). Any decision to extend the transportation credit 
period must be issued in writing prior to the first day of the month 
for which the extension is to be effective.
    The provisions adopted in this decision also differ slightly from 
Mid-Am's proposal with respect to plant-to-plant shipments that are 
eligible for transportation credits. As proposed by Mid-Am, Class I 
bulk transfers from any other order plant would qualify for 
transportation credits. As adopted in this decision, however, the 
credits are limited to plants that are outside of the marketing areas 
of Orders 5, 7, 11, and 46.
    There was a great deal of concern expressed at the hearing about 
``stair stepping'' milk from one market to another. For instance, if 
milk from Order 11 was transferred to Order 7 while at the same time 
supplemental milk was brought into Order 11 from Order 46, handlers in 
Order 11 conceivably could be contributing funds to replace milk that, 
if not sent to Order 7, would have been available to Order 11 handlers.
    This issue can be quite complex, particularly in large markets, 
such as the Southeast market. It may very well make economic sense to 
ship surplus milk from one part of a market (for example, southern 
Louisiana in the Order 7 marketing area) to another market that is 
short of milk (for example, the Upper Florida market) while during the 
same day bring in bulk milk for a handler in another part of the 
marketing area (for example, Fleming Dairy in Nashville) from another 
order plant (other than from one of the 4 orders involved in this 
proceeding). Given the order's current pricing structure, it is 
unrealistic to expect milk from southern Louisiana, where the Class I 
differential price is $3.58, to be shipped north to Nashville, where 
the Class I differential price is $2.55.
    The attached order amendments place no restriction on the the 
interorder shipment of milk among the 4 markets, but they do not 
provide transportation credits for such shipments. The record of this 
hearing supports a restriction of credits to milk that is truly 
supplemental to the market. For this reason, transportation credits 
should be restricted to bulk shipments from plants outside of these 4 
marketing areas. Data and testimony in the record indicate that nearly 
all of the supplemental milk needed for these 4 markets comes from 
plants located outside of the 4 marketing areas anyway, so that the 
restriction should not be a major problem for handlers in locating 
supplemental milk. Moreover, handlers may still obtain plant milk from 
within the 4 orders; they simply would not be able to get a 
transportation credit for such milk.
    Another departure from the original Mid-Am proposal concerns the 
milk eligible for the transportation credit. It was apparent from 
hearing testimony and briefs that other cooperatives operating in these 
markets are more apt to supply the market with supplemental milk on a 
direct-ship basis rather than transferring milk from an other order 
plant. Such cooperatives include CVMPA, MMI, and Select Milk Producers. 
The testimony was convincing that permitting a credit on such imports 
would be more equitable to those organizations that are unable to 
import plant milk, would promote efficiencies in bringing supplemental 
milk directly from producers' farms, would result in better quality 
milk because unnecessary pumpovers are eliminated, and would result in 
less milk lost due to reduced handling.

[[Page 37637]]

    While the inclusion of farm-to-plant milk is a logical extension of 
the transportation credit concept, there are some practical problems to 
overcome in implementing such a provision. One of the first problems 
that arises in constructing a transportation credit on farm-to-plant 
milk is distinguishing a market's regular producer milk from its 
supplemental producer milk on which the credit would apply.
    A primary consideration in distinguishing the market's regular 
producers from the supplemental producers is the location of producers' 
farms. It is reasonable to conclude that the markets' regular producers 
are located reasonably close to the plants receiving their milk. Thus, 
such producers' farms are likely to be within the geographic marketing 
areas defined in each order. Accordingly, transportation credits should 
not apply to any producer whose farm is located within any of the 4 
marketing areas. This provision was suggested by MMI and should be 
adopted.
    Not all of the pool distributing plants regulated under these 
orders are located within the defined marketing areas. For example, a 
pool distributing plant regulated under Order 5 is located in 
Lynchburg, Virginia, which is outside of the Order 5 marketing area. In 
such a case, some other location criteria is needed to distinguish a 
regular producer from a supplemental producer.
    In its suggested language, MMI proposed restricting supplemental 
producers to those who are more than 85 miles from Louisville or 
Lexington, Kentucky, or Evansville, Indiana. This proposal should be 
adopted but expanded to cover all pool distributing plants within or 
outside of the 4 marketing areas. In other words, farm-to-plant milk 
that is eligible for a transportation credit must be produced on a farm 
that is outside of the 4 marketing areas and at least 85 miles away 
from the plant to which the milk is delivered.
    In addition to considering the geographic location of a dairy farm 
for the purpose of determining whether milk from that farm is 
supplemental to a market's needs, attention should be focused on 
whether milk from that farm is regularly associated with the market or 
is shipped to the market as needed.
    As noted earlier, MMI in its brief stated that transportation 
credits should not apply to the milk of a dairy farmer who was a 
producer under Orders 5, 6, 7, 11, 12, 13, or 46 during more than 8 
months in the previous July through June period or if more than 32 
days' production of the producer was received as producer milk under 
these orders during the entire 12-month period. CVMPA's brief contained 
a similar proposal but did not include Orders 6, 12, and 13 (the 3 
Florida orders) and specified 35 days' production, rather than 32, for 
the prior 12-month period.
    These proposals should not be adopted. As proposed, if a dairy 
farmer was a producer on one of these markets for more than 8 months in 
the previous July through June period, the dairy farmer could not be 
considered as a supplemental producer under another one of the 4 
markets. For example, if a dairy farmer from Texas was a producer under 
Order 11 during the months of January through September 1996, that 
dairy farmer would be ineligible to receive a transportation credit 
under Order 7 in October 1996, even though the dairy farmer's farm 
meets the location criteria set forth in this decision for a 
supplemental producer and the dairy farmer was never previously 
associated with Order 7.
    It is questionable whether the provisions of one order should be 
based on a dairy farmer's association with another order. Each order 
should stand on its own. Accordingly, the determination as to whether a 
producer is regularly associated with a market or is, in fact, only 
seasonally associated with the market should be based on the dairy 
farmer's association with that market alone.
    Since the need for supplemental milk generally drops off sharply 
after the month of December--1996 being an exception--in all of these 
markets and does not reappear, usually, until the month of July, it is 
reasonable to conclude that the milk of a producer who is located 
outside of any of these marketing areas generally would not be needed 
during the months of January through June, but might be needed starting 
in July. It is also logical that the milk of a supplemental producer 
would not be needed each day but perhaps once or twice a week. 
Accordingly, if a dairy farmer was a regular supplier of the market 
during January through June--i.e., a ``producer'' on the market for 
more than 4 of those months--the milk of such a dairy farmer should not 
be considered supplemental milk during the following months of July 
through December. It would be unduly restrictive to disqualify a dairy 
farmer for shipping a limited amount of milk during one or two months 
of the January through June period, however, because even the months of 
January and June can be short months in the Southeast. Therefore, the 
provision should be flexible enough to accommodate some shipments to 
the market during the January through June period. Specifically, a 
dairy farmer should not lose his/her status as a supplemental producer 
if his/her milk is shipped to a market for not more than 2 months of 
the January through June period. However, shipments during this period 
should be of a limited duration, so not more than 32 days' production 
may have been received as producer milk during the two months of the 
January through June period in which the dairy farmer was a producer on 
the market.
    Having established the criteria to distinguish a supplemental 
producer from a regular producer, attention must now focus on the 
provisions needed to establish the transportation credit for farm-to-
plant supplemental milk. The first question that arises in this regard 
is the determination of the origination point for the load of milk. Two 
problems arise. First, there may be more than one dairy farmer's milk 
on the truck. Second, even if a dairy farmer can fill up an entire 
truck with milk, his or her farm may be impossible to pinpoint on a 
map.
    This decision adopts two alternatives to determine the origination 
point for a load of farm-to-plant milk. First, after filling the tank 
truck with farm milk, the hauler may elect to stop at an independently 
operated truck stop to obtain a certified weight receipt identifying 
the truck, the gross weight of the loaded truck, the time and date, and 
the location of the truck stop. This certificate would be turned over 
to the pool plant operator receiving this load of milk and, in turn, be 
made available to the market administrator for verification of the 
information. Truck stops with scales are commonly found along major 
highways and in small towns and cities. Thus, it would be neither time-
consuming nor expensive to fulfill this requirement.
    Alternatively, if the hauler does not obtain a certified weight 
receipt to establish an origination point, the market administrator 
will determine the location of the farm of the last load of milk that 
was added to the truck, locate the nearest city, and compute the 
mileage from that city to the receiving pool plant for purposes of 
determining the mileage. If this alternative understates the mileage 
involved to the plant, the hauler can easily obtain a certified weight 
receipt if that would result in a more accurate transportation credit.
    Traditionally, provisions in Federal milk orders have used the 
county courthouse as a basing point to determine mileage. In their 
briefs, MMI and CVMPA suggested using the county courthouse closest to 
the farm of the last producer on the route to establish the

[[Page 37638]]

origination point for a load of farm-to-plant milk. The reason for not 
adopting this suggestion is that there are now more precise ways of 
measuring the mileage between various points using any of several 
computer mapping programs that are available in addition to more 
traditional standard highway mileage guides that are available to the 
market administrator. By specifying ``city'' rather than ``county 
courthouse,'' in conjunction with providing the option of establishing 
location based upon a certified weight receipt, we hope to achieve 
greater precision in establishing the mileage between the last 
producer's farm and the plant to which the milk is delivered.
    This decision adopts the proposed transportation credit balancing 
fund concept proposed by Mid-Am, as well as a monthly assessment on 
Class I milk to provide revenue for the fund. It differs from the 
proposal, however, in using the higher of the hauling credits 
distributed in the immediately preceding 6 months or in the preceding 
July-December period for purposes of determining the current month's 
assessment level in Sec. 100X.81(a). This was done to ensure that the 
fund will have a sufficient balance to meet the markets' needs when 
credits start to be distributed in the month of July. As proposed by 
Mid-Am, if no credits were distributed during the months of January 
through June, no new assessment would be warranted. Therefore, the 
yardstick to measure the assessment level would begin to decline in 
January and, if no new credits were given out, would be zero by July. 
This depletion of the fund could jeopardize its usefulness and require 
the market administrator to transfer funds for transportation credits 
from the producer-settlement fund.
    This should only be done as a last resort. It will be less likely 
to occur by using the alternative yardstick approach adopted in this 
decision for determining the minimum balance needed in the 
transportation credit balancing fund.
    The market administrator is authorized to maintain the 
transportation credit balancing fund, deposit assessments into it, and 
distribute transportation credits from it. Payments due from a handler 
will be offset against payments due to a handler.
    The use of a transportation credit balancing fund will permit 
assessments that are needed for the transportation credits to be spread 
out throughout the year. This will permit the assessment rate to be 
kept at a lower and more stable level. It will also allow handlers to 
reflect the assessment in their pricing plans. At the maximum level 
permitted, the 6-cent assessment represents about one-half cent of the 
raw product cost of a gallon of milk.
    In its brief, Gold Star Dairy suggested exempting from the 
assessment Class I sales made outside of the 4 marketing areas. This 
suggestion should not be adopted. While such an exemption might put 
Gold Star in a more favorable position with competitors in other 
markets, such as the Texas marketing area, it would not be fair to 
those handlers with whom Gold Star competes in the Southeast marketing 
area, its primary sales territory. Moreover, if supplemental milk is 
brought into any one of the 4 markets to supply a handler, there is no 
reason why that handler should not bear its fair share of the 
transportation costs for such milk, regardless of where the handler may 
eventually sell it.
    The market administrator will announce the assessment for the 
transportation credit balancing fund on the 5th day of the month 
preceding the month to which it applies. Accordingly, on the 5th day of 
December, the assessment would be announced for January. An exception 
to this rule should be made during the first month that transportation 
credits are in effect because otherwise all of the first month's 
transportation credits would have to come out of pool funds. 
Accordingly, for the first month that these rules are in effect, the 
assessment for the transportation credit balancing fund will be 
announced no later than the Federal Register publication date of the 
interim order amending the orders. For example, if the interim order 
amending the orders is published on July 1, 1996, handlers will be 
notified of the assessment for July on, or a few days before, that day. 
On July 5, handlers will be notified of the assessment for August.
    For the first 3 months that these amendments are effective, the 
assessment for the transportation credit balancing fund should be 6 
cents per hundredweight. It is necessary to specify a rate in Section 
81(c) of the attached orders because there is no 6-month credit 
distribution history from which to determine it, as provided in 
paragraph (a) of Section 81.
    It is possible that during the first year that these provisions are 
in effect, and possibly thereafter under unusual conditions, it may be 
necessary to transfer funds from the producer-settlement fund to pay 
the transportation credits that are distributed. Transferring funds 
from the producer-settlement fund will result in lower uniform prices 
to producers. For this reason, several parties suggested, instead, 
borrowing from the producer-settlement fund reserve and paying back the 
reserve fund in future months from transportation credit assessments 
that are collected.
    The market administrator maintains a producer-settlement fund (psf) 
reserve equal to approximately 4-5 cents per hundredweight of producer 
milk in the pool. This reserve is used to pay audit adjustments and 
other unforseen expenses.
    The suggestion to borrow from the reserve is no doubt well-
intentioned, but the alternative of transferring funds from the psf 
itself is the better approach for several reasons.
    First, the reserve fund is maintained as a cushion to provide ready 
cash for audit adjustments and other unforseen expenses that arise. 
Depleting this reserve to pay for transportation credits, even for a 
temporary period of time, would not be prudent.
    Second, we appreciate the concerns of those who do not want to 
reduce the blend price to producers to pay for transportation credits, 
but we believe that this transfer of funds may only be necessary during 
the first year that this provision is in effect. Thereafter, there 
should be adequate funds in the transportation credit balancing fund to 
pay for future transportation credits.
    Third, by transferring funds from the psf, rather than borrowing 
the funds from the psf reserve, it will not be necessary to postpone 
the disbursement of credits, as might be necessary under the 
alternative approach suggested by Milkco and others. To the extent that 
reimbursement for transportation expenses is postponed, certain 
handlers will be disadvantaged relative to others who did not incur 
such expenses.
    Finally, by transferring funds from the psf, rather than borrowing 
the funds from the psf reserve, producers will be sharing with handlers 
the cost of supplying the market with supplemental milk. This will help 
to minimize the assessment to handlers during months when 
transportation credits are not needed because the current month's 
assessments will not be used to pay back funds borrowed from the psf 
reserve for prior months but, instead, will be used to pay only current 
months' credits or to build up the transportation credit balancing fund 
for future months.
    At this hearing, concern was once again expressed about the 
difficulty of obtaining supplemental milk when the Class III-A price is 
allegedly providing a profitable market for manufacturers of nonfat dry 
milk. A proposal was made to suspend Class III-A pricing while 
transportation credits are in effect.

[[Page 37639]]

    As noted earlier, Mid-Am testified that it shut down its butter-
powder plants in these 4 markets during the months of July through 
December 1995. Therefore, to the extent that handlers were competing 
with butter-powder plants for supplemental milk, it was not 
supplemental milk in these 4 markets.
    The proposal to suspend Class III-A pricing in other markets goes 
beyond the scope of this hearing. Therefore, the proposals to suspend 
such pricing must be denied.
    Several handlers criticized the proposed transportation credits for 
not including the Florida markets. They argued that since the Florida 
markets are the markets most in need of supplemental milk, it is unfair 
that handlers in those markets do not have to pay the assessment for 
the transportation credit balancing fund.
    There was no testimony at this hearing concerning the current 
premium structure in the Florida markets. It is a known fact, however, 
that the Florida markets are 100 percent cooperatively supplied and 
that the premium structure in those markets as of the September 1995 
hearing was markedly different (and much higher) than the premium 
structure prevailing in Orders 5, 7, 11, and 46.
    Whether or not the Florida markets have the type of transportation 
credits adopted in this decision is immaterial to the need for such 
provisions in Orders 5, 7, 11, and 46. Given the tight supply situation 
prevailing in the Florida markets, it is unlikely that any Florida 
handler would have a pricing advantage over a handler regulated under 
one of the 4 markets involved in this proceeding. Moreover, since 
cooperative associations control the entire supply of milk in the 
Florida markets, those markets do not have to deal with the difficult 
issue of unequal sharing of the cost of supplying the market with 
supplemental milk (i.e., the member versus nonmember issue).
    The absence of a transportation credit in Florida does not mean 
that handlers in Orders 5, 7, 11, and 46 will bear the cost of 
providing supplemental milk to Florida. To the extent that milk is 
shipped to Florida from any of the 4 markets involved in this 
proceeding, such milk likely would have been shipped with or without 
Florida's participation in the current hearing.

3. Whether Emergency Marketing Conditions in the Four Regulated Areas 
Warrant the Omission of a Recommended Decision and the Opportunity to 
File Written Exceptions Thereto With Respect to Issue 1

    The omission of a recommended decision was proposed by the Mid-Am 
spokesman. He also requested that the issue be handled on an expedited 
basis, but suggested that the Secretary may wish to issue a tentative 
final decision to provide another opportunity for comments and 
adjustments to the amendments. No testimony was received in opposition 
to the request.
    The due and timely execution of the functions of the Secretary 
under the Act imperatively and unavoidably require the omission of a 
recommended decision and an opportunity for written exceptions with 
respect to Issue No. 1. The continued orderly marketing of milk in the 
respective areas requires that the attached order be made effective as 
soon as possible, since the amount of supplemental milk needed for 
Class I use in each of the four orders is expected to increase 
significantly during the summer and fall months. Handlers, cooperative 
associations, and others should know promptly and with certainty how 
the Department is proposing to facilitate the importation of 
supplemental milk so that arrangements may be made.
    It is therefore found that good cause exists for omission of a 
recommended decision and the opportunity for filing exceptions to it. 
As noted earlier, however, this decision is being issued as a tentative 
final decision. What this means is that producers will vote on the 
amendments to the 4 orders just as they would with a normal final 
decision. However, interested parties will have 30 days from the 
Federal Register publication of this tentative final decision to 
comment on it. After the comment period is over, the Department will 
then issue a final decision, and producers will again have an 
opportunity to vote on the orders as amended.

Rulings on Proposed Findings and Conclusions

    Briefs and proposed findings and conclusions were filed on behalf 
of certain interested parties. These briefs, proposed findings and 
conclusions, and the evidence in the record were considered in making 
the findings and conclusions set forth above. To the extent that the 
suggested findings and conclusions filed by interested parties are 
inconsistent with the findings and conclusions set forth herein, the 
requests to make such findings or reach such conclusions are denied for 
the reasons previously stated in this decision.

General Findings

    The findings and determinations hereinafter set forth supplement 
those that were made when the aforesaid orders were first issued and 
when they were amended. The previous findings and determinations are 
hereby ratified and confirmed, except where they may conflict with 
those set forth herein.
    The following findings are hereby made with respect to each of the 
aforesaid tentative marketing agreements and orders:
    (a) The tentative marketing agreements and orders, as hereby 
proposed to be amended, and all of the terms and conditions thereof, 
will tend to effectuate the declared policy of the Act;
    (b) The parity prices of milk as determined pursuant to section 2 
of the Act are not reasonable in view of the price of feeds, available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk in the aforesaid marketing areas, and the 
minimum prices specified in the tentative marketing agreements and the 
orders, as hereby proposed to be amended, are such prices as will 
reflect the aforesaid factors, insure a sufficient quantity of pure and 
wholesome milk, and are in the public interest; and
    (c) The tentative marketing agreements and the orders, as hereby 
proposed to be amended, will regulate the handling of milk in the same 
manner as, and will be applicable only to persons in the respective 
classes of industrial and commercial activity specified in, marketing 
agreements upon which a hearing has been held.

Interim Marketing Agreement and Interim Order Amending the Orders

    Annexed hereto and made a part hereof is an Interim Order amending 
the orders regulating the handling of milk in the aforesaid marketing 
areas, which has been decided upon as the detailed and appropriate 
means of effectuating the foregoing conclusions. It is hereby ordered 
that this entire decision and order amending the orders be published in 
the Federal Register. Parties who desire to enter into a marketing 
agreement covering the terms and conditions of the attached interim 
order may request a marketing agreement from the market administrator 
of the respective order.

[[Page 37640]]

Determination of Producer Approval and Representative Period

    April 1996 is hereby determined to be the representative period for 
the purpose of ascertaining whether the issuance of the orders, as 
amended and as hereby proposed to be amended, regulating the handling 
of milk in the aforesaid marketing areas is approved or favored by 
producers, as defined under the terms of the individual orders (as 
amended and as hereby proposed to be amended), who during the 
representative period were engaged in the production of milk for sale 
within the aforesaid marketing areas.
    It is hereby directed that a referendum be conducted to ascertain 
producer approval in the Louisville-Lexington-Evansville marketing 
area. The referendum must be conducted and completed on or before the 
30th day from the date that this decision is issued in accordance with 
the procedure for the conduct of referenda (7 CFR 900.300-311), to 
determine whether the issuance of the attached order as amended, and as 
hereby proposed to be amended, regulating the handling of milk in the 
Louisville-Lexington-Evansville marketing area is approved or favored 
by producers, as defined under the terms of the order, as amended and 
as hereby proposed to be amended, who during such representative period 
were engaged in the production of milk for sale within the marketing 
area.
    The agent of the Secretary to conduct such referendum is hereby 
designated to be Arnold M. Stallings.

List of Subjects in 7 CFR Parts 1005, 1007, 1011, and 1046

    Milk marketing orders.

    Dated: July 12, 1996.
Michael V. Dunn,
Assistant Secretary, Marketing and Regulatory Programs.

Interim Order Amending the Orders Regulating the Handling of Milk in 
Certain Specified Marketing Areas

    This interim order shall not become effective unless and until the 
requirements of Sec. 900.14 of the rules of practice and procedure 
governing proceedings to formulate marketing agreements and marketing 
orders have been met.

Findings and Determinations

    The findings and determinations hereinafter set forth supplement 
those that were made when the orders were first issued and when they 
were amended. The previous findings and determinations are hereby 
ratified and confirmed, except where they may conflict with those set 
forth herein.
    (a) Findings. A public hearing was held upon certain proposed 
amendments to the tentative marketing agreements and to the orders 
regulating the handling of milk in the aforesaid marketing areas. The 
hearing was held pursuant to the provisions of the Agricultural 
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), and the 
applicable rules of practice and procedure (7 CFR Part 900).
    Upon the basis of the evidence introduced at such hearing and the 
record thereof, it is found that:
    (1) The said orders as hereby amended, and all of the terms and 
conditions thereof, will tend to effectuate the declared policy of the 
Act;
    (2) The parity prices of milk, as determined pursuant to section 2 
of the Act, are not reasonable in view of the price of feeds, available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk in the aforesaid marketing areas. The 
minimum prices specified in the orders as hereby amended are such 
prices as will reflect the aforesaid factors, insure a sufficient 
quantity of pure and wholesome milk, and be in the public interest; and
    (3) The said orders as hereby amended regulate the handling of milk 
in the same manner as, and are applicable only to persons in the 
respective classes of industrial or commercial activity specified in, 
marketing agreements upon which a hearing has been held.

 Proposed Interim Order Relative to Handling

    It is therefore ordered that on and after the effective date 
hereof, the handling of milk in each of the specified marketing areas 
shall be in conformity to and in compliance with the terms and 
conditions of the orders, as amended, and as hereby amended, as 
follows:
    The authority citation for 7 CFR Parts 1005, 1007, 1011, and 1046 
is revised to read as follows:

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

PART 1005--MILK IN THE CAROLINA MARKETING AREA

    1. In Sec. 1005.30, paragraphs (a) and (c) are revised to read as 
follows:


Sec. 1005.30   Reports of receipts and utilization.

* * * * *
    (a) Each handler, with respect to each of its pool plants, shall 
report the quantities of skim milk and butterfat contained in or 
represented by:
    (1) Receipts of producer milk, including producer milk diverted 
from the pool plant to other plants;
    (2) Receipts of milk from handlers described in Sec. 1005.9(c);
    (3) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (4) Receipts of other source milk;
    (5) Receipts of bulk milk from a plant regulated under another 
Federal order, except Federal Orders 1007, 1011, and 1046, for which a 
transportation credit is requested pursuant to Sec. 1005.82;
    (6) Receipts of producer milk described in Sec. 1005.82(c)(2), 
including the identity of the individual producers whose milk is 
eligible for the transportation credit pursuant to Sec. 1005.82(c)(2);
    (7) Inventories at the beginning and end of the month of fluid milk 
products and products specified in Sec. 1005.40(b)(1); and
    (8) The utilization or disposition of all milk, filled milk, and 
milk products required to be reported pursuant to this paragraph (a).
* * * * *
    (c) Each handler described in Sec. 1005.9 (b) and (c) shall report:
    (1) The quantities of all skim milk and butterfat contained in 
receipts of milk from producers;
    (2) The utilization or disposition of all such receipts; and
    (3) With respect to milk for which a cooperative association is 
requesting a transportation credit pursuant to Sec. 1005.82, all of the 
information required in paragraphs (a) (5) and (6) of this section.
* * * * *
    2. Section 1005.61 is amended by redesignating paragraphs (a)(4), 
(a)(5), (b)(5), and (b)(6) as paragraphs (a)(5), (a)(6), (b)(6), and 
(b)(7), respectively, amending paragraph (b)(3) by revising ``(a)(3)'' 
to read ``(a)(4)'' and ``(a)(4)(ii)'' to read ``(a)(5)(ii)'', amending 
newly designated paragraphs (b)(6) by revising ``(b)(4)'' to read 
``(b)(5)'', amending newly designated paragraph (b)(7) by revising 
``(b)(5)'' to read ``(b)(6)'', and adding new paragraphs (a)(4) and 
(b)(5) to read as follows:


Sec. 1005.61   Computation of uniform price (including weighted average 
price and uniform prices for base and excess milk).

    (a) * * *
    (4) Deduct the amount by which the amount due from the 
transportation credit balancing fund pursuant to Sec. 1005.82 exceeds 
the available balance in the transportation credit balancing fund 
pursuant to Sec. 1005.80;
* * * * *

[[Page 37641]]

    (b) * * *
    (5) Deduct the amount by which the amount due from the 
transportation credit balancing fund pursuant to Sec. 1005.82 exceeds 
the available balance in the transportation credit balancing fund 
pursuant to Sec. 1005.80;
* * * * *
    3. Following Sec. 1005.78, a new undesignated center heading and 
Secs. 1005.80, 1005.81, and 1005.82 are added to read as follows:

Marketwide Service Payments


Sec. 1005.80   Transportation credit balancing fund.

    The market administrator shall maintain a separate fund known as 
the Transportation Credit Balancing Fund into which shall be deposited 
the payments made by handlers pursuant to Sec. 1005.81 and out of which 
shall be made the payments due handlers pursuant to Sec. 1005.82. 
Payments due a handler shall be offset against payments due from the 
handler.


Sec. 1005.81   Payments to the transportation credit balancing fund.

    (a) On or before the 12th day after the end of the month, each 
handler shall pay to the market administrator a transportation credit 
balancing fund assessment determined by multiplying the pounds of Class 
I milk assigned pursuant to Sec. 1005.44 by $0.06 per hundredweight or 
such lesser amount as the market administrator deems necessary to 
maintain a balance in the fund equal to the higher of the following 
amounts:
    (1) The total transportation credits dispensed during the prior 
July-December period; or
    (2) The total transportation credits dispensed during the 
immediately preceding 6-month period.
    (b) On or before the 13th day after the end of the month, the 
market administrator shall credit the transportation credit balancing 
fund, from the producer-settlement fund, any amount deducted pursuant 
to Sec. 1005.61 (a)(4) or (b)(5).
    (c) The market administrator shall announce publicly on or before 
the 5th day of the month the assessment pursuant to paragraph (a) of 
this section for the following month, except that for the first month 
that this section is effective the assessment shall be announced no 
later than [the publication date of the final rule in the Federal 
Register] and for the first 3 months that this section is effective the 
assessment pursuant to paragraph (a) of this section shall be 6 cents 
per hundredweight.


Sec. 1005.82   Payments from the transportation credit balancing fund.

    (a) On or before the 13th day after the end of each of the months 
of July through December and any other month in which transportation 
credits are in effect pursuant to paragraph (b) of this section, the 
market administrator shall pay to each handler that received, and 
reported pursuant to Sec. 1005.30 (a)(5), bulk milk transferred from an 
other order plant as described in paragraph (c)(1) of this section or 
that received, and reported pursuant to Sec. 1005.30(a)(6), bulk milk 
directly from producers' farms as specified in paragraph (c)(2) of this 
section an amount determined pursuant to paragraph (d) of this section. 
In the event that a qualified cooperative association is the 
responsible party for whose account such milk is received and written 
documentation of this fact is provided to the market administrator 
pursuant to Sec. 1005.30(c)(3) prior to the date payment is due, the 
transportation credits for such milk computed pursuant to this section 
shall be made to such cooperative association rather than to the 
operator of the pool plant at which the milk was received.
    (b) The market administrator may extend the period during which 
transportation credits are in effect (i.e., the transportation credit 
period) to any of the months of January through June if the market 
administrator receives a written request to do so 15 days prior to the 
beginning of the month for which the request is made and, after 
conducting an independent investigation, finds that such extension is 
necessary to assure the market of an adequate supply of milk for fluid 
use. Before making such a finding, the market administrator shall 
notify the Director of the Dairy Division and all handlers in the 
market that an extension is being considered and invite written data, 
views, and arguments. Any decision to extend the transportation credit 
period must be issued in writing prior to the first day of the month 
for which the extension is to be effective.
    (c) The transportation credit described in paragraph (a) of this 
section shall apply to the following milk:
    (1) Bulk milk received from a plant regulated under another Federal 
order, except Federal Orders 1007, 1011, and 1046, and allocated to 
Class I milk pursuant to Sec. 1005.44; and
    (2) Bulk milk classified pro rata as Class I milk pursuant to 
Sec. 1005.44 received directly from the farms of dairy farmers at pool 
distributing plants under the following conditions:
    (i) The dairy farmer was not a ``producer'' under this order during 
more than 2 of the immediately preceding months of January through June 
and not more than 32 days' production of the dairy farmer was received 
as producer milk under this order during that period; and
    (ii) The farm on which the milk was produced is not located within 
the specified marketing area of this order or the marketing areas of 
Federal Orders 1007, 1011, or 1046, and, is not within 85 miles of the 
plant to which its milk is delivered.
    (d) Transportation credits shall be computed as follows:
    (1) For milk described in paragraph (c)(1) of this section, the 
market administrator shall:
    (i) Determine the shortest hard-surface highway distance between 
the transferor plant and the transferee plant;
    (ii) Multiply the number of miles computed in paragraph (d)(1)(i) 
of this section by 0.37 cents;
    (iii) Subtract the other order's Class I price applicable at the 
transferor plant's location from the Class I price applicable at the 
transferee plant as specified in Sec. 1005.53;
    (iv) Subtract any positive difference computed in paragraph 
(d)(1)(iii) of this section from the amount computed in paragraph 
(d)(1)(ii) of this section; and
    (v) Multiply the remainder computed in paragraph (d)(1)(iv) of this 
section by the hundredweight of milk described in paragraph (c)(1) of 
this section.
    (2) For milk described in paragraph (c)(2) of this section:
    (i) Each milk hauler that is transporting the milk of producers 
described in paragraph (c)(2) of this section may stop at the nearest 
independently-operated truck stop with a truck scale and obtain a 
weight certificate indicating the weight of the truck and its contents, 
the date and time of weighing, and the location of the truck stop. The 
location of the truck stop shall be used as a starting point for the 
purpose of measuring the distance to the pool plant receiving that load 
of milk. If a weight certificate for a supplemental load of milk for 
which a transportation credit is requested is not available, the market 
administrator shall use the nearest city to the last producer's farm 
from which milk was picked up for delivery to the receiving pool plant;
    (ii) For each bulk tank load of milk received pursuant to paragraph 
(d)(2)(i) of this section, the market administrator shall determine the 
shortest hard-surface highway distance between the receiving pool plant 
and the truck stop or city, as the case may be;

[[Page 37642]]

    (iii) Multiply the number of miles computed in paragraph (d)(2)(ii) 
of this section by 0.37 cents;
    (iv) Multiply the number computed in paragraph (d)(2)(iii) of this 
section by the hundredweight of milk described in paragraph (c)(2) of 
this section;
    (v) Subtract this order's Class I price applicable at the 
origination point determined pursuant to paragraph (d)(2)(ii) of this 
section from the Class I price applicable at the distributing plant 
receiving the milk; and
    (vi) Subtract any positive difference computed in paragraph 
(d)(2)(v) of this section from the amount computed in paragraph 
(d)(2)(iv) of this section.

PART 1007--MILK IN THE SOUTHEAST MARKETING AREA

    4. The authority citation for part 1007 continues to read as 
follows:

    Authority: 7 U.S.C. 601-674.
    4a. In Sec. 1007.30, paragraphs (a) and (c) are revised to read as 
follows:


Sec. 1007.30   Reports of receipts and utilization.

* * * * *
    (a) Each handler, with respect to each of its pool plants, shall 
report the quantities of skim milk and butterfat contained in or 
represented by:
    (1) Receipts of producer milk, including producer milk diverted by 
the handler from the pool plant to other plants;
    (2) Receipts of milk from handlers described in Sec. 1007.9(c);
    (3) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (4) Receipts of other source milk;
    (5) Receipts of bulk milk from a plant regulated under another 
Federal order, except Federal Orders 1005, 1011, and 1046, for which a 
transportation credit is requested pursuant to Sec. 1007.82;
    (6) Receipts of producer milk described in Sec. 1007.82(c)(2), 
including the identity of the individual producers whose milk is 
eligible for the transportation credit pursuant to Sec. 1007.82(c)(2);
    (7) Inventories at the beginning and end of the month of fluid milk 
products and products specified in Sec. 1007.40(b)(1); and
    (8) The utilization or disposition of all milk, filled milk, and 
milk products required to be reported pursuant to this paragraph (a).
 * * * * *
    (c) Each handler described in Sec. 1007.9 (b) and (c) shall report:
    (1) The quantities of skim milk and butterfat contained in receipts 
of milk from producers;
    (2) The utilization or disposition of all such receipts; and
    (3) With respect to milk for which a cooperative association is 
requesting a transportation credit pursuant to Sec. 1007.82, all of the 
information required in paragraphs (a) (5) and (6) of this section.
* * * * *
    5. Section 1007.61 is amended by redesignating paragraphs (a)(4), 
(a)(5), (b)(5), and (b)(6) as paragraphs (a)(5), (a)(6), (b)(6), and 
respectively, (b)(7), amending (b)(3) by revising ``(a)(3)'' to read 
``(a)(4)'' and ``(a)(4)(ii)'' to read ``(a)(5)(ii)'', amending newly 
designated paragraph (b)(6) by revising ``(b)(4)'' to read ``(b)(5)'', 
amending newly designated paragraph (b)(7) by revising ``(b)(5)'' to 
read ``(b)(6)'', and adding new paragraphs (a)(4) and (b)(5) to read as 
follows:


Sec. 1007.61   Computation of uniform price (including weighted average 
price and uniform prices for base and excess milk).

    (a) * * *
    (4) Deduct the amount by which the amount due from the 
transportation credit balancing fund pursuant to Sec. 1007.82 exceeds 
the available balance in the transportation credit balancing fund 
pursuant to Sec. 1007.80;
* * * * *
    (b) * * *
    (5) Deduct the amount by which the amount due from the 
transportation credit balancing fund pursuant to Sec. 1007.82 exceeds 
the available balance in the transportation credit balancing fund 
pursuant to Sec. 1007.80;
* * * * *
    6. Following Sec. 1007.78, a new undesignated center heading and 
Secs. 1007.80, 1007.81, and 1007.82 are added to read as follows:

Marketwide Service Payments


Sec. 1007.80   Transportation credit balancing fund.

    The market administrator shall maintain a separate fund known as 
the Transportation Credit Balancing Fund into which shall be deposited 
the payments made by handlers pursuant to Sec. 1007.81 and out of which 
shall be made the payments due handlers pursuant to Sec. 1007.82. 
Payments due a handler shall be offset against payments due from the 
handler.


Sec. 1007.81   Payments to the transportation credit balancing fund.

    (a) On or before the 12th day after the end of the month, each 
handler shall pay to the market administrator a transportation credit 
balancing fund assessment determined by multiplying the pounds of Class 
I milk assigned pursuant to Sec. 1007.44 by $0.06 per hundredweight or 
such lesser amount as the market administrator deems necessary to 
maintain a balance in the fund equal to the higher of the following 
amounts:
    (1) The total transportation credits dispensed during the prior 
July-December period; or
    (2) The total transportation credits dispensed during the 
immediately preceding 6-month period.
    (b) On or before the 13th day after the end of the month, the 
market administrator shall credit the transportation credit balancing 
fund, from the producer-settlement fund, any amount deducted pursuant 
to Sec. 1007.61 (a)(4) or (b)(5).
    (c) The market administrator shall announce publicly on or before 
the 5th day of the month the assessment pursuant to paragraph (a) of 
this section for the following month, except that for the first month 
that this section is effective the assessment shall be announced no 
later than [the publication date of the final rule in the Federal 
Register] and for the first 3 months that this section is effective the 
assessment pursuant to paragraph (a) of this section shall be 6 cents 
per hundredweight.


Sec. 1007.82   Payments from the transportation credit balancing fund.

    (a) On or before the 13th day after the end of each of the months 
of July through December and any other month in which transportation 
credits are in effect pursuant to paragraph (b) of this section, the 
market administrator shall pay to each handler that received, and 
reported pursuant to Sec. 1007.30(a)(5), bulk milk transferred from an 
other order plant as described in paragraph (c)(1) of this section or 
that received, and reported pursuant to Sec. 1007.30(a)(6), bulk milk 
directly from producers' farms as specified in paragraph (c)(2) of this 
section an amount determined pursuant to paragraph (d) of this section. 
In the event that a qualified cooperative association is the 
responsible party for whose account such milk is received and written 
documentation of this fact is provided to the market administrator 
pursuant to Sec. 1007.30(c)(3) prior to the date payment is due, the 
transportation credits for such milk computed pursuant to this section 
shall be made to such cooperative association rather than to the 
operator of the pool plant at which the milk was received.
    (b) The market administrator may extend the period during which 
transportation credits are in effect (i.e., the transportation credit 
period) to any

[[Page 37643]]

of the months of January through June if the market administrator 
receives a written request to do so 15 days prior to the beginning of 
the month for which the request is made and, after conducting an 
independent investigation, finds that such extension is necessary to 
assure the market of an adequate supply of milk for fluid use. Before 
making such a finding, the market administrator shall notify the 
Director of the Dairy Division and all handlers in the market that an 
extension is being considered and invite written data, views, and 
arguments. Any decision to extend the transportation credit period must 
be issued in writing prior to the first day of the month for which the 
extension is to be effective.
    (c) The transportation credit described in paragraph (a) of this 
section shall apply to the following milk:
    (1) Bulk milk received from a plant regulated under another Federal 
order, except Federal Orders 1005, 1011, and 1046 allocated to Class I 
milk pursuant to Sec. 1007.44; and
    (2) Bulk milk classified pro rata as Class I milk pursuant to 
Sec. 1007.44 received directly from the farms of dairy farmers at pool 
distributing plants under the following conditions:
    (i) The dairy farmer was not a ``producer'' under this order during 
more than 2 of the immediately preceding months of January through June 
and not more than 32 days' production of the dairy farmer was received 
as producer milk under this order during that period; and
    (ii) The farm on which the milk was produced is not located within 
the specified marketing area of this order or the marketing areas of 
Federal Orders 1005, 1011 or 1046, and, is not within 85 miles of the 
plant to which its milk is delivered.
    (d) Transportation credits shall be computed as follows:
    (1) For milk described in paragraph (c)(1) of this section, the 
market administrator shall:
    (i) Determine the shortest hard-surface highway distance between 
the transferor plant and the transferee plant;
    (ii) Multiply the number of miles computed in paragraph (d)(1)(i) 
of this section by 0.37 cents;
    (iii) Subtract the other order's Class I price applicable at the 
transferor plant's location from the Class I price applicable at the 
transferee plant as specified in Sec. 1007.52;
    (iv) Subtract any positive difference computed in paragraph 
(d)(1)(iii) of this section from the amount computed in paragraph 
(d)(1)(ii) of this section; and
    (v) Multiply the remainder computed in paragraph (d)(1)(iv) of this 
section by the hundredweight of milk described in paragraph (c)(1) of 
this section.
    (2) For milk described in paragraph (c)(2) of this section:
    (i) Each milk hauler that is transporting the milk of producers 
described in paragraph (c)(2) of this section may stop at the nearest 
independently-operated truck stop with a truck scale and obtain a 
weight certificate indicating the weight of the truck and its contents, 
the date and time of weighing, and the location of the truck stop. The 
location of the truck stop shall be used as a starting point for the 
purpose of measuring the distance to the pool plant receiving that load 
of milk. If a weight certificate for a supplemental load of milk for 
which a transportation credit is requested is not available, the market 
administrator shall use the nearest city to the last producer's farm 
from which milk was picked up for delivery to the receiving pool plant;
    (ii) For each bulk tank load of milk received pursuant to paragraph 
(d)(2)(i) of this section, the market administrator shall determine the 
shortest hard-surface highway distance between the receiving pool plant 
and the truck stop or city, as the case may be;
    (iii) Multiply the number of miles computed in paragraph (d)(2)(ii) 
of this section by 0.37 cents;
    (iv) Multiply the number computed in paragraph (d)(2)(iii) of this 
section by the hundredweight of milk described in paragraph (c)(2) of 
this section;
    (v) Subtract the order's Class I price applicable at the 
origination point determined pursuant to paragraph (d)(2)(ii) of this 
section from the Class I price applicable at the distributing plant 
receiving the milk; and
    (vi) Subtract any positive difference computed in paragraph 
(d)(2)(v) of this section from the amount computed in paragraph 
(d)(2)(iv) of this section.

PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA

    7. In Sec. 1011.30, paragraphs (a) and (c) are revised to read as 
follows:


Sec. 1011.30  Reports of receipts and utilization.

* * * * *
    (a) Each handler, with respect to each of his pool plants, shall 
report the quantities of skim milk and butterfat contained in or 
represented by:
    (1) Receipts of producer milk, including producer milk diverted 
from the pool plant to other plants;
    (2) Receipts of milk from handlers described in Sec. 1011.9(c);
    (3) Receipts of milk from handlers described in 1011.9(d);
    (4) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (5) Receipts of other source milk;
    (6) Receipts of bulk milk from a plant regulated under another 
Federal order, except Federal Orders 1005, 1007, and 1046, for which a 
transportation credit is requested pursuant to Sec. 1011.82;
    (7) Receipts of producer milk described in Sec. 1011.82(c)(2), 
including the identity of the individual producers whose milk is 
eligible for the transportation credit pursuant to Sec. 1011.82(c)(2);
    (8) Inventories at the beginning and end of the month of fluid milk 
products and products specified in Sec. 1011.40(b)(1); and
    (9) The utilization or disposition of all milk, filled milk, and 
milk products required to be reported pursuant to this paragraph (a).
* * * * *
    (c) Each handler described in Sec. 1011.9(b), (c) and (d) shall 
report:
    (1) The quantities of all skim milk and butterfat contained in 
receipts of milk from producers;
    (2) The utilization or disposition of all such receipts; and
    (3) With respect to milk for which a cooperative association is 
requesting a transportation credit pursuant to Sec. 1011.82, all of the 
information required in paragraphs (a) (6) and (7) of this section.
* * * * *
    8. Section 1011.61 is amended by redesignating paragraphs (a)(4), 
(a)(5), (b)(5), and (b)(6) as paragraphs (a)(5), (a)(6), paragraph 
(b)(6) and (b)(7), respectively amending paragraph (b)(3) by revising 
``(a)(3)'' to read ``(a)(4)'' and ``(a)(4)(ii)'' to read 
``(a)(5)(ii)'', amending newly designated paragraph (b)(6) by 
revising``(b)(4)'' to read ``(b)(5)'', amending newly designated 
paragraph (b)(7) by revising ``(b)(5)'' to read ``(b)(6)'', and adding 
new paragraphs (a)(4) and (b)(5) to read as follows:


Sec. 1011.61  Computation of uniform price (including weighted average 
price and uniform prices for base and excess milk).

    (a) * * *
    (4) Deduct the amount by which the amount due from the 
transportation credit balancing fund pursuant to Sec. 1011.82 exceeds 
the available balance in the transportation credit balancing fund 
pursuant to Sec. 1011.80;
* * * * *
    (b) * * *
    (5) Deduct the amount by which the amount due from the 
transportation credit balancing fund pursuant to Sec. 1011.82 exceeds 
the available balance

[[Page 37644]]

in the transportation credit balancing fund pursuant to Sec. 1011.80;
* * * * *
    9. Following Sec. 1011.78, a new undesignated center heading and 
Secs. 1011.80, 1011.81, and 1011.82 are added to read as follows:

Marketwide Service Payments


Sec. 1011.80  Transportation credit balancing fund.

    The market administrator shall maintain a separate fund known as 
the Transportation Credit Balancing Fund into which shall be deposited 
the payments made by handlers pursuant to Sec. 1011.81 and out of which 
shall be made the payments due handlers pursuant to Sec. 1011.82. 
Payments due a handler shall be offset against payments due from the 
handler.


Sec. 1011.81  Payments to the transportation credit balancing fund.

    (a) On or before the 12th day after the end of the month, each 
handler shall pay to the market administrator a transportation credit 
balancing fund assessment determined by multiplying the pounds of Class 
I milk assigned pursuant to Sec. 1011.44 by $0.06 per hundredweight or 
such lesser amount as the market administrator deems necessary to 
maintain a balance in the fund equal to the higher of the following 
amounts:
    (1) The total transportation credits dispensed during the prior 
July-December period; or
    (2) The total transportation credits dispensed during the 
immediately preceding 6-month period.
    (b) On or before the 13th day after the end of the month, the 
market administrator shall credit the transportation credit balancing 
fund, from the producer-settlement fund, any amount deducted pursuant 
to Sec. 1011.61 (a)(4) or (b)(5).
    (c) The market administrator shall announce publicly on or before 
the 5th day of the month the assessment pursuant to paragraph (a) of 
this section for the following month, except that for the first month 
that this section is effective the assessment shall be announced no 
later than [the publication date of the final rule in the Federal 
Register] and for the first 3 months that this section is effective the 
assessment pursuant to paragraph (a) of this section shall be 6 cents 
per hundredweight.


Sec. 1011.82   Payments from the transportation credit balancing fund.

    (a) On or before the 13th day after the end of each of the months 
of July through December and any other month in which transportation 
credits are in effect pursuant to paragraph (b) of this section, the 
market administrator shall pay to each handler that received, and 
reported pursuant to Sec. 1011.30(a)(6), bulk milk transferred from an 
other order plant as described in paragraph (c)(1) of this section or 
that received, and reported pursuant to Sec. 1011.30(a)(7), bulk milk 
directly from producers' farms as specified in paragraph (c)(2) of this 
section an amount determined pursuant to paragraph (d) of this section. 
In the event that a qualified cooperative association is the 
responsible party for whose account such milk is received and written 
documentation of this fact is provided to the market administrator 
pursuant to Sec. 1011.30(c)(3) prior to the date payment is due, the 
transportation credits for such milk computed pursuant to this section 
shall be made to such cooperative association rather than to the 
operator of the pool plant at which the milk was received.
    (b) The market administrator may extend the period during which 
transportation credits are in effect (i.e., the transportation credit 
period) to any of the months of January through June if the market 
administrator receives a written request to do so 15 days prior to the 
beginning of the month for which the request is made and, after 
conducting an independent investigation, finds that such extension is 
necessary to assure the market of an adequate supply of milk for fluid 
use. Before making such a finding, the market administrator shall 
notify the Director of the Dairy Division and all handlers in the 
market that an extension is being considered and invite written data, 
views, and arguments. Any decision to extend the transportation credit 
period must be issued in writing prior to the first day of the month 
for which the extension is to be effective.
    (c) The transportation credit described in paragraph (a) of this 
section shall apply to the following milk:
    (1) Bulk milk received from a plant regulated under another Federal 
order, except Federal Orders 1005, 1007, and 1046, and allocated to 
Class I milk pursuant to Sec. 1011.44; and
    (2) Bulk milk classified pro rata as Class I milk pursuant to 
Sec. 1011.44 received directly from the farms of dairy farmers at pool 
distributing plants under the following conditions:
    (i) The dairy farmer was not a ``producer'' under this order during 
more than 2 of the immediately preceding months of January through June 
and not more than 32 days' production of the dairy farmer was received 
as producer milk under this order during that period; and
    (ii) The farm on which the milk was produced is not located within 
the specified marketing area of this order or the marketing areas of 
Federal Orders 1005, 1007, or 1046, and, is not within 85 miles of the 
plant to which its milk is delivered.
    (d) Transportation credits shall be computed as follows:
    (1) For milk described in paragraph (c)(1) of this section, the 
market administrator shall:
    (i) Determine the shortest hard-surface highway distance between 
the transferor plant and the transferee plant;
    (ii) Multiply the number of miles computed in paragraph (d)(1)(i) 
of this section by 0.37 cents;
    (iii) Subtract the other order's Class I price applicable at the 
transferor plant's location from the Class I price applicable at the 
transferee plant as specified in Sec. 1011.52;
    (iv) Subtract any positive difference computed in paragraph 
(d)(1)(iii) of this section from the amount computed in paragraph 
(d)(1)(ii) of this section; and
    (v) Multiply the remainder computed in paragraph (d)(1)(iv) of this 
section by the hundredweight of milk described in paragraph (c)(1) of 
this section.
    (2) For milk described in paragraph (c)(2) of this section:
    (i) Each milk hauler that is transporting the milk of producers 
described in paragraph (c)(2) of this section may stop at the nearest 
independently-operated truck stop with a truck scale and obtain a 
weight certificate indicating the weight of the truck and its contents, 
the date and time of weighing, and the location of the truck stop. The 
location of the truck stop shall be used as a starting point for the 
purpose of measuring the distance to the pool plant receiving that load 
of milk. If a weight certificate for a supplemental load of milk for 
which a transportation credit is requested is not available, the market 
administrator shall use the nearest city to the last producer's farm 
from which milk was picked up for delivery to the receiving pool plant;
    (ii) For each bulk tank load of milk received pursuant to paragraph 
(d)(2)(i) of this section, the market administrator shall determine the 
shortest hard-surface highway distance between the receiving pool plant 
and the truck stop or city, as the case may be;
    (iii) Multiply the number of miles computed in paragraph (d)(2)(ii) 
of this section by 0.37 cents;
    (iv) Multiply the number computed in paragraph (d)(2)(iii) of this 
section by

[[Page 37645]]

the hundredweight of milk described in paragraph (c)(2) of this 
section;
    (v) Subtract this order's Class I price applicable at the 
origination point determined pursuant to paragraph (d)(2)(ii) of this 
section from the Class I price applicable at the distributing plant 
receiving the milk; and
    (vi) Subtract any positive difference computed in paragraph 
(d)(2)(v) of this section from the amount computed in paragraph 
(d)(2)(iv) of this section.

PART 1046--MILK IN THE LOUISVILLE-LEXINGTON-EVANSVILLE MARKETING 
AREA

    10. The authority citation for part 1046 continues to read as 
follows:

    Authority: Secs. 1-19, 48 Stat. 31, as amended (7 U.S.C. 601-
674).

    10 a. In Sec. 1046.30, paragraphs (a) and (c) are revised to read 
as follows:


Sec. 1046.30   Reports of receipts and utilization.

* * * * *
    (a) Each handler, with respect to each of his pool plants, shall 
report the quantities of skim milk and butterfat contained in or 
represented by:
    (1) Receipts of producer milk, including producer milk diverted by 
the handler from the pool plant to other plants;
    (2) Receipts of milk from handlers described in Sec. 1046.9(c);
    (3) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (4) Receipts of other source milk;
    (5) Receipts of bulk milk from a plant regulated under another 
Federal order, except Federal Orders 1005, 1007, and 1011, for which a 
transportation credit is requested pursuant to Sec. 1046.82;
    (6) Receipts of producer milk described in Sec. 1046.82(c)(2), 
including the identity of the individual producers whose milk is 
eligible for the transportation credit pursuant to Sec. 1046.82(c)(2);
    (7) Inventories at the beginning and end of the month of fluid milk 
products and products specified in Sec. 1046.40(b)(1); and
    (8) The utilization or disposition of all milk, filled milk, and 
milk products required to be reported pursuant to this paragraph (a).
* * * * *
    (c) Each handler described in Sec. 1046.9 (b) and (c) shall report:
    (1) The quantities of all skim milk and butterfat contained in 
receipts of milk from producers;
    (2) The utilization or disposition of all such receipts; and
    (3) With respect to milk for which a cooperative association is 
requesting a transportation credit pursuant to Sec. 1046.82, all of the 
information required in paragraphs (a) (5) and (6) of this section.
* * * * *
    11. Section 1046.61 is amended by redesignating paragraphs (a)(4), 
(a)(5), (b)(5), and (b)(6) as paragraphs (a)(5), (a)(6), (b)(6), and 
(b)(7), respectively, amending paragraph (b)(3) by revising ``(a)(3)'' 
to read ``(a)(4)'' and ``(a)(4)(ii)'' to read ``(a)(5)(ii)'', amending 
newly designated paragraph (b)(6) by revising ``(b)(4)'' to read 
``(b)(5)'', amending newly designated paragraph (b)(7) by revising 
``(b)(5)'' to read ``(b)(6)'', and adding new paragraphs (a)(4) and 
(b)(5) to read as follows:


Sec. 1046.61  Computation of uniform price (including weighted average 
price and uniform prices for base and excess milk).

    (a) * * *
    (4) Deduct the amount by which the amount due from the 
transportation credit balancing fund pursuant to Sec. 1046.82 exceeds 
the available balance in the transportation credit balancing fund 
pursuant to Sec. 1046.80;
* * * * *
    (b) * * *
    (5) Deduct the amount by which the amount due from the 
transportation credit balancing fund pursuant to Sec. 1046.82 exceeds 
the available balance in the transportation credit balancing fund 
pursuant to Sec. 1046.80;
* * * * *
    12. In Sec. 1046.73, paragraph (f)(2) is revised to read as 
follows:


Sec. 1046.73  Payments to producers and to cooperative associations.

* * * * *
    (f) * * *
    (2) On or before the 10th day after the end of the following month 
for milk received during the month an amount computed at not less than 
the value of such milk at the minimum prices for milk in each class, as 
adjusted by the butterfat differential specified in Sec. 1046.74 
applicable at the location of the receiving handler's pool plant and 
any transportation credit that is due the cooperative association 
pursuant to Sec. 1046.82(a), less the payment made pursuant to 
paragraph (f)(1) of this section.
    13. Following Sec. 1046.78, a new undesignated center heading and 
Secs. 1046.80, 1046.81, and 1046.82 are added to read as follows:

Marketwide Service Payments


Sec. 1046.80  Transportation credit balancing fund.

    The market administrator shall maintain a separate fund known as 
the Transportation Credit Balancing Fund into which shall be deposited 
the payments made by handlers pursuant to Sec. 1046.81 and out of which 
shall be made the payments due handlers pursuant to Sec. 1046.82. 
Payments due a handler shall be offset against payments due from the 
handler.


Sec. 1046.81  Payments to the transportation credit balancing fund.

    (a) On or before the 12th day after the end of the month, each 
handler shall pay to the market administrator a transportation credit 
balancing fund assessment determined by multiplying the pounds of Class 
I milk assigned pursuant to Sec. 1046.44 by $0.06 per hundredweight or 
such lesser amount as the market administrator deems necessary to 
maintain a balance in the fund equal to the higher of the following 
amounts:
    (1) The total transportation credits dispensed during the prior 
July-December period; or
    (2) The total transportation credits dispensed during the 
immediately preceding 6-month period.
    (b) On or before the 13th day after the end of the month, the 
market administrator shall credit the transportation credit balancing 
fund, from the producer-settlement fund, any amount deducted pursuant 
to Sec. 1046.61 (a)(4) or (b)(5).
    (c) The market administrator shall announce publicly on or before 
the 5th day of the month the assessment pursuant to paragraph (a) of 
this section for the following month, except that for the first month 
that this section is effective the assessment shall be announced no 
later than [the publication date of the final rule in the Federal 
Register] and for the first 3 months that this section is effective the 
assessment pursuant to paragraph (a) of this section shall be 6 cents 
per hundredweight.


Sec. 1046.82  Payments from the transportation credit balancing fund.

    (a) On or before the 13th day after the end of each of the months 
of July through December and any other month in which transportation 
credits are in effect pursuant to paragraph (b) of this section, the 
market administrator shall pay to each handler that received, and 
reported pursuant to Sec. 1046.30(a)(5), bulk milk transferred from an 
other order plant as described in paragraph (c)(1) of this section or 
that received, and reported pursuant to Sec. 1046.30(a)(6), bulk milk 
directly from producers' farms as specified in paragraph (c)(2) of this 
section an amount determined pursuant to

[[Page 37646]]

paragraph (d) of this section. In the event that a qualified 
cooperative association is the responsible party for whose account such 
milk is received and written documentation of this fact is provided to 
the market administrator pursuant to Sec. 1046.30(c)(3) prior to the 
date payment is due, the transportation credits for such milk computed 
pursuant to this section shall be paid to such cooperative association 
by the pool plant operator pursuant to Sec. 1046.73(f)(2).
    (b) The market administrator may extend the period during which 
transportation credits are in effect (i.e., the transportation credit 
period) to any of the months of January through June if the market 
administrator receives a written request to do so 15 days prior to the 
beginning of the month for which the request is made and, after 
conducting an independent investigation, finds that such extension is 
necessary to assure the market of an adequate supply of milk for fluid 
use. Before making such a finding, the market administrator shall 
notify the Director of the Dairy Division and all handlers in the 
market that an extension is being considered and invite written data, 
views, and arguments. Any decision to extend the transportation credit 
period must be issued in writing prior to the first day of the month 
for which the extension is to be effective.
    (c) The transportation credit described in paragraph (a) of this 
section shall apply to the following milk:
    (1) Bulk milk received from a plant regulated under another Federal 
order, except Federal Orders 1005, 1007, and 1011, and allocated to 
Class I milk pursuant to Sec. 1046.44; and
    (2) Bulk milk classified pro rata as Class I milk pursuant to 
Sec. 1046.44 received directly from the farms of dairy farmers at pool 
distributing plants under the following conditions:
    (i) The dairy farmer was not a ``producer'' under this order during 
more than 2 of the immediately preceding months of January through June 
and not more than 32 days' production of the dairy farmer was received 
as producer milk under this order during that period; and
    (ii) The farm on which the milk was produced is not located within 
the specified marketing area of this order or the marketing areas of 
Federal Orders 1005, 1007, or 1011, and, is not within 85 miles of the 
plant to which its milk is delivered.
    (d) Transportation credits shall be computed as follows:
    (1) For milk described in paragraph (c)(1) of this section, the 
market administrator shall:
    (i) Determine the shortest hard-surface highway distance between 
the transferor plant and the transferee plant;
    (ii) Multiply the number of miles computed in paragraph (d)(1)(i) 
of this section by 0.37 cents;
    (iii) Subtract the other order's Class I price applicable at the 
transferor plant's location from the Class I price applicable at the 
transferee plant as specified in Sec. 1046.52;
    (iv) Subtract any positive difference computed in paragraph 
(d)(1)(iii) of this section from the amount computed in paragraph 
(d)(1)(ii) of this section; and
    (v) Multiply the remainder computed in paragraph (d)(1)(iv) of this 
section by the hundredweight of milk described in paragraph (c)(1) of 
this section.
    (2) For milk described in paragraph (c)(2) of this section:
    (i) Each milk hauler that is transporting the milk of producers 
described in paragraph (c)(2) of this section may stop at the nearest 
independently-operated truck stop with a truck scale and obtain a 
weight certificate indicating the weight of the truck and its contents, 
the date and time of weighing, and the location of the truck stop. The 
location of the truck stop shall be used as a starting point for the 
purpose of measuring the distance to the pool plant receiving that load 
of milk. If a weight certificate for a supplemental load of milk for 
which a transportation credit is requested is not available, the market 
administrator shall use the nearest city to the last producer's farm 
from which milk was picked up for delivery to the receiving pool plant;
    (ii) For each bulk tank load of milk received pursuant to paragraph 
(d)(2)(i) of this section, the market administrator shall determine the 
shortest hard-surface highway distance between the receiving pool plant 
and the truck stop or city, as the case may be;
    (iii) Multiply the number of miles computed in paragraph (d)(2)(ii) 
of this section by 0.37 cents;
    (iv) Multiply the number computed in paragraph (d)(2)(iii) of this 
section by the hundredweight of milk described in paragraph (c)(2) of 
this section;
    (v) Subtract this order's Class I price applicable at the 
origination point determined pursuant to paragraph (d)(2)(ii) of this 
section from the Class I price applicable at the distributing plant 
receiving the milk; and
    (vi) Subtract any positive difference computed in paragraph 
(d)(2)(v) of this section from the amount computed in paragraph 
(d)(2)(iv) of this section.

[FR Doc. 96-18227 Filed 7-15-96; 3:34 pm]
BILLING CODE 3410-02-P