[Federal Register Volume 67, Number 70 (Thursday, April 11, 2002)]
[Rules and Regulations]
[Pages 17848-17864]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8770]



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Part IV





Department of Agriculture





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Agricultural Marketing Service



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7 CFR Part 1280



Lamb Promotion, Research, and Information Order; Final Rule

  Federal Register / Vol. 67, No. 70 / Thursday, April 11, 2002 / Rules 
and Regulations  

[[Page 17848]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1280

[No. LS-01-12]
RIN 0581-AC06


Lamb Promotion, Research, and Information Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule establishes a Lamb Promotion, Research, and 
Information Order (Order) under the Commodity Promotion, Research, and 
Information Act of 1996. The Order provides for an industry-funded 
promotion, research, and information program for lamb and lamb products 
including pelts but excluding wool and wool products. The program 
applies to all sales of sheep and lambs. Under the Order, lamb 
producers, seedstock producers, feeders, and exporters will pay an 
assessment of one-half cent ($.005) per pound when live lambs are sold. 
The first handler, primarily packers, will pay an additional assessment 
of 30 cents per head of lambs purchased by the first handler for 
slaughter. The first handler or exporter will remit the total amount of 
assessment due to the Lamb Promotion, Research, and Information Board 
(Board).

EFFECTIVE DATE: April 12, 2002.

FOR FURTHER INFORMATION CONTACT: Marlene Betts, Acting Chief; Marketing 
Programs Branch, Room 2627-S; Livestock and Seed Program, AMS, USDA; 
STOP 0251; 1400 Independence Avenue, SW.; Washington, DC 20250-0251; 
telephone (202) 720-1115, fax (202) 720-1125, or e-mail at 
[email protected].

SUPPLEMENTARY INFORMATION: This Order is issued pursuant to the 
Commodity Promotion, Research, and Information Act of 1996 (Act), 7 
U.S.C. 7411-7425; Public Law 104-127, enacted April 4, 1996, 
hereinafter referred to as the Act. Prior documents in this proceeding:
    Invitation to submit proposals was published November 23, 1999 [64 
FR 65665].
    Invitation to submit proposals: Reopening and extension of time to 
submit proposals was published January 12, 2000 [65 FR 1825].
    Proposed Rule--Lamb Promotion, Research, and Information Order was 
published September 21, 2001 [66 FR 48764].

Executive Orders 12988 and 12866

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. It is not intended to have retroactive effect. 
Section 524 of the Act provides that the Act shall not affect or 
preempt any other Federal or State law authorizing promotion or 
research relating to an agricultural commodity.
    Under Sec. 519 of the Act, a person subject to the Order may file a 
petition with the Department of Agriculture (Department) stating that 
the Order, any provision of the Order, or any obligation imposed in 
connection with the Order, is not established in accordance with the 
law, and requesting a modification of the Order or an exemption from 
the Order. Any petition filed challenging the Order, any provision of 
the Order, or any obligation imposed in connection with the Order, 
shall be filed within 2 years after the effective date of the Order, 
provision, or obligation subject to challenge in the petition. The 
petitioner will have the opportunity for a hearing on the petition. 
Thereafter, the Department will issue a ruling on the petition. The Act 
provides that the district court of the United States for any district 
in which the petitioner resides or carries on business shall have the 
jurisdiction to review a final ruling on the petition, if the 
petitioner files a complaint for that purpose not later than 20 days 
after the date of the entry of the final ruling.
    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and therefore has not been reviewed by the Office 
of Management and Budget (OMB).

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 
601 et seq.), the Agency examined the impact of this rule on small 
entities and has prepared a final regulatory flexibility analysis. The 
purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions so that small businesses will not be 
disproportionately burdened.
    The Act authorizes generic programs of promotion, research, and 
information for agricultural commodities. Congress found that it is in 
the national public interest and vital to the welfare of the 
agricultural economy of the United States to maintain and expand 
existing markets and develop new markets and uses for agricultural 
commodities through industry-funded, Government-supervised, generic 
commodity promotion programs.
    This Order is intended to develop and finance an effective and 
coordinated program of promotion, research, and information to maintain 
and expand the markets for lamb and lamb products. In response to 
invitations to submit proposals published in the Federal Register 
November 23, 1999 [64 FR 65665], and January 12, 2000 [65 FR 1825], a 
proposed Order developed by the Lamb Industry Checkoff Exploration Team 
was submitted by the American Sheep Industry Association (Proponent I). 
Proponent I proposed a program assessing lamb producers, feeders, first 
handlers, and seedstock producers. In addition, two partial proposals 
were submitted by the National Lamb Feeders Association (Proponent II) 
and the United States Seedstock Alliance (Proponent III). Proponent II 
proposed definitions for feeder, producer, and seedstock producer and 
that the Department should be authorized to appoint only one feeder 
representative who annually feeds 5,000 or more head of lambs and to 
appoint two feeders who annually feed less than 5,000 head of lamb. 
Proponent III proposed that the Order be approved in a referendum by a 
majority of those voting.
    While the Order imposes certain recordkeeping and reporting 
requirements on persons subject to the Order, the information required 
under the Order can be compiled from records currently maintained. 
First handlers and exporters will collect and remit the assessments on 
lamb and lamb products to the Board. Their responsibilities will 
include accurate recordkeeping and accounting of the number of lambs 
purchased, the names of the producers, seedstock producers, and 
feeders, and the purchase date. The required reporting forms require 
the minimum information necessary to effectively carry out the 
requirements of the program, and their use is necessary to fulfill the 
intent of the Act. Such records and reports shall be retained for at 
least 2 years beyond the fiscal year of their applicability. These 
requirements are already being conducted as a normal business practice. 
In addition, a person who is a market agency; i.e., commission 
merchant, auction market, or livestock market in the business of 
receiving lambs for sale on commission for or on behalf of a producer, 
seedstock producer, or feeder will be required to collect an assessment 
and pass the collected assessments on to the subsequent purchaser. 
There will be a minimal burden on persons who are market agencies. It 
is not anticipated that they will be required to submit records of 
their transactions involving lamb purchases and the required assessment 
collection to the Board.

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Information on such transactions can be obtained through an audit of 
the market agencies' records. Such records are already being maintained 
as a normal business practice. This will include such records or 
documents that evidence payment of an assessment pursuant to the 
requirements in Sec. 1280.225(b). In addition, market agencies must 
certify as required by regulations prescribed by the Department that 
the provisions of Sec. 1280.217(b) have been met.
    First handlers of lambs who seek nomination to serve on the Board 
will be required to complete a nomination form that will be submitted 
to the Department.
    The added burden to first handlers and exporters for a lamb 
promotion, research, and information program is therefore minimal.
    There is also a minimal burden on producers, seedstock producers, 
and feeders. The burden relates to those producers, seedstock 
producers, and feeders who will seek nomination to serve on the Board, 
request a refund of assessments paid, and vote in referenda. In 
addition, the Order will require producers, seedstock producers, and 
feeders to provide information to the Board or the Department when 
requested and to keep records to qualify for a refund. However, it is 
not anticipated that producers, seedstock producers, and feeders will 
be required to regularly submit assessment forms to the Board. In some 
instances, as part of the Board's compliance operation, the information 
will be obtained through an audit of producer's, seedstock producer's, 
or feeder's records to confirm information provided by a first handler 
or if a first handler did not file the required reports. When seeking 
nomination to serve on the Board, producers, seedstock producers, 
feeders, and first handlers will be required to complete one form that 
will be submitted to the Department by a certified organization able to 
make nominations.
    The estimated annual cost of providing the required information to 
the Board by an estimated 70,804 respondents (51,800 producers, 15,000 
seedstock producers, 3,318 market agencies, 571 first handlers, 100 
feeders, and 15 exporters) is $989,840 or $13.98 per respondent.
    Once the program is implemented, the Department will oversee 
program operations and conduct a referendum not later than 3 years 
after assessments first begin under this part. In accordance with the 
Act, subsequent referenda will be conducted (1) not later than 7 years 
after assessments first begin to determine whether lamb producers, 
seedstock producers, feeders, first handlers, and exporters support 
continuation of the program, (2) at the request of the Board 
established under the Order, or (3) at the request of 10 percent or 
more of the number of persons eligible to vote in referenda. 
Additionally, the Department may conduct a referendum at any time to 
determine whether the continuation, suspension, or termination of the 
Order or a provision of the Order is favored by those eligible to vote 
in the referendum.
    There are approximately 51,800 producers, 15,000 seedstock 
producers, 100 feeders, 571 first handlers, and 15 exporters of lamb 
who will be subject to the program. Most of the lamb producers, 
seedstock producers, feeders, and exporters would be classified as 
small businesses under the criteria established by the Small Business 
Administration (SBA) (13 CFR 121.201). Most first handlers would not be 
classified as small businesses. SBA defines small agricultural handlers 
as those whose annual receipts are less than $5 million and small 
agricultural producers are defined as those having annual receipts of 
less than $750,000.
    To compete against rising foreign imports and flat domestic demand, 
the domestic lamb industry proposed a promotion and research checkoff 
program to improve production efficiency and promote consumption.
    The domestic lamb industry is composed of two groups: lamb 
producers and lamb packers and processors. Domestic lamb producers can 
be further divided into three groups: (1) Breeders of purebred sheep 
and lambs used for breeding purposes, (2) commercial market producers 
who maintain sheep flocks to produce lambs for feeding and slaughter, 
and (3) commercial feed lot operators who feed lambs until ready for 
slaughter. The groups overlap and firms often perform two or more 
operations. Although many sheep production operations are located in 
the east, the majority of sheep are concentrated in the western and 
corn belt States. In the west and southwest, sheep production can be 
the most productive use of the land in some areas.
    Packers and processors are the second component of the domestic 
lamb industry. Lamb packers are companies that slaughter lambs. Most 
packers also slaughter one or more other types of livestock. This part 
of the industry includes eight federally inspected firms accounting for 
96 percent of the domestically slaughtered sheep and lambs. Processors, 
along with some packers, break lamb carcasses into different cuts. 
There are less than 10 major processing firms and, like the packers, 
only a small portion of their operations are devoted to processing 
lamb.
    Domestic lamb producers have been competing with surging foreign 
lamb imports. Between 1993 and 1997, lamb imports increased by 49.3 
percent from 56.5 million pounds to 84.4 million pounds. The greatest 
increase in imports occurred during the period 1996 through 1997, when 
imports rose by 18.5 percent. Imports in 1998 were 30 percent above 
those in 1997, and imports in the first quarter of 1999 were 10 percent 
above those in the first quarter of 1998. As measured by quantity, 
imports captured 23.3 percent of the domestic market in January through 
September 1998, up from 11.2 percent in 1993. The loss of market share 
is magnified by the fact that domestic per capita lamb meat consumption 
dropped from 1.3 pounds in 1993 to 1.1 pounds in 1995 where it remained 
through 1997.
    Increasingly, imports have shifted away from frozen, unprocessed 
carcasses to value-added product categories. In 1993, fresh or chilled 
lamb meat accounted for only 20 percent of imports. By 1997, the figure 
had doubled to 40 percent. Processed lamb, particularly boneless cuts, 
have replaced lamb carcasses. Carcasses represented only 3 percent of 
1997 imports whereas bone-in and boneless boxed lamb cuts accounted for 
66.8 percent and 30.2 percent, respectively, of the carcass-equivalent 
volume of imported lamb meat. Between January 1993 and June 1998, 
prices on imported Australian and New Zealand lamb, which account for 
virtually all imported lamb, were anywhere from 9.4 percent to 70.3 
percent less expensive than domestic products.
    With the increase in lamb imports, the domestic production, packing 
and processing of lamb has dropped significantly. Domestic lamb meat 
production declined by 26 percent from 326.7 million pounds in 1993 to 
243 million pounds in 1999. Production was down 3 percent in May of 
2000 compared to the same period in 1999. Domestic producers' share of 
the net sales value on lamb has also declined with imports representing 
30.7 percent in January through September 1998, up from 11.2 percent in 
1993. The number of domestic lamb producers has decreased from 93,280 
in 1993 to 74,710 in 1997, a 20 percent decline. With an estimated 2.2 
workers per operation, the decline in lamb producers translates into a 
drop in workers from 205,216 in 1993 to 164,362 in 1997. Federally

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inspected sheep and lamb slaughtering plants have declined from 711 to 
571. Only 9 plants can slaughter more than 100,000 sheep and lambs 
annually. One was closed in 1995 and another was closed in 1998.
    Imports have also affected prices and sales. Direct prices for 
slaughter lambs dropped by 25 percent between the first quarter of 1997 
and the first quarter of 1998. During the second quarter of 1998, 
direct prices were 17.6 percent lower than prices during the same 
period in 1997. Similarly, for the same periods, auction prices fell by 
20.5 percent and 14.9 percent, respectively. For packers, prices on 
carcasses dropped 30.8 percent between September 1997 and April 1998.
    In response to the surge in imports, domestic producers along with 
packers and processors filed a petition with the International Trade 
Commission (ITC) seeking import relief. ITC conducted an investigation 
(Investigation No. TA 201-68) and found that imports have depressed 
prices and sales of domestic lamb causing serious harm to domestic 
producers' financial conditions (ITC Publication 3176, April 1999). It 
also found that although there is evidence that U.S. consumers prefer 
domestically produced lamb, domestic producers engage in little or no 
promotion. In recommending relief, a majority of the commissioners 
stressed the need for an industry marketing program supported by 
checkoff funds to improve production efficiency and increase demand.
    Because of the decline in the domestic lamb industry caused by 
imports and flat demand, domestic producers are seeking ways to reverse 
this trend. A checkoff program to promote and market domestic lamb 
products is one way this could be accomplished. A coordinated promotion 
and marketing effort will help domestic producers compete more 
effectively against imports while increasing demand for lamb. It will 
also permit domestic producers to fund projects to develop more 
effective and efficient production processes. More efficient production 
along with increased demand will lead to higher, more stable prices for 
producers, packers, and processors.
    The Order authorizes that a mandatory assessment be paid by 
producers, seedstock producers, exporters, and feeders at a rate of 
one-half cent ($.005) per pound of live lamb sold. First handlers will 
pay an additional assessment of 30 cents ($.30) per head of lambs 
purchased by the first handler for slaughter and will remit the total 
amount of assessment due to the Board.
    At the rate of assessment of one-half cent ($.005) per pound of 
live lamb sold and the additional $.30 paid by packers on slaughter 
lambs, the Board will collect approximately $3 million annually. It is 
expected that the assessment represents less than 1 percent of 
producers' average return.
    The program will be administered by the Board appointed by the 
Department from nominations submitted by certified industry 
organizations. The Department will certify industry organizations that 
will nominate producers, seedstock producers, feeders, and first 
handlers to serve as members on the Board. The Board will recommend the 
assessment rate, programs and projects, budgets, and any rules and 
regulations that might be necessary for the administration of the 
program.
    The Board will consist of 13 members: six producer representatives, 
three feeder representatives, three first handlers, and one seedstock 
producer. The members primarily will be nominated by eligible regional, 
State, and national organizations.
    The recordkeeping and reporting requirements for the Order have 
been designed to ensure compliance and generate the data necessary for 
the effective conduct of the program.
    With regard to alternatives to this rule, the Act itself provides 
authority to tailor a program according to the individual needs of an 
industry. Section 514 of the Act provides for orders applicable to 
producers, first handlers, and other persons in the marketing chain as 
appropriate. Provision is made for permissive terms in an order in 
Sec. 516 of the Act and authorizes an order to provide for coverage of 
research, promotion, and information activities to expand, improve, or 
make more efficient the marketing or use of an agricultural commodity 
in both domestic and foreign markets; provision for assessing imports; 
provision for reserve funds; and provision for credits for generic and 
branded activities. In addition, Sec. 518 of the Act provides for a 
referendum to ascertain approval of an order to be conducted either 
prior to its going into effect or within 3 years after assessments 
first begin under an order. An order also may provide for its approval 
in a referendum to be based upon (1) a majority of those persons 
voting; (2) persons voting for approval who represent a majority of the 
volume of the agricultural commodity; or (3) a majority of those 
persons voting for approval who also represent a majority of the volume 
of the agricultural commodity. Section 515 of the Act provides for 
establishment of a board from among producers, first handlers, feeders, 
and others in the marketing chain as appropriate.
    This Order includes provisions for domestic expansion and 
improvement and a delayed referendum to be conducted within 3 years 
after assessments begin. The Order will continue if a majority of those 
persons voting in the referendum who also represent a majority of the 
volume of lambs produced, slaughtered, or exported during the 
representative period established by the Department.
    The Department has not identified any relevant Federal rules that 
are currently in effect that duplicate, overlap, or conflict with this 
rule. The proposed rule that was published in the Federal Register on 
September 21, 2001 [66 FR 48763], invited interested persons to submit 
comments to the Department concerning potential effects of the proposed 
Order. No comments were received regarding the RFA.

Paperwork Reduction Act

    In accordance with OMB regulation (5 CFR Part 1320) that implements 
the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. Chapter 35), the 
information collection and recordkeeping requirements that are imposed 
by this Order were submitted to OMB for approval and approved under OMB 
control numbers 0581-0198 and 0505-0001.
    Title: Lamb Promotion, Research and Information Order.
    OMB Number: 0505-0001. Expiration Date of Approval: July 31, 2002
    OMB Number: 0581-0198.
    Expiration Date of Approval: 3 years from date of approval.
    Type of Request: Approval of new information collection.
    Abstract: The information collection requirements in the request 
are essential to carry out the intent of the Act.
    Under the Order, first handlers and exporters will be required to 
collect assessments from lamb producers, feeders, and seedstock 
producers and submit the required reports and remit assessments to the 
Board. Persons who are market agencies will be required to collect an 
assessment and pass the collected assessments on to the subsequent 
purchaser. It is not anticipated that they will be required to submit 
records of their transactions involving lamb purchases and the required 
assessment collection to the Board. While the Order will impose certain 
recordkeeping requirements on persons subject to the Order, information 
required under the Order can be compiled from records currently 
maintained. Such records will be retained for at least 2 years beyond 
the

[[Page 17851]]

fiscal year of their applicability. The estimated annual cost of 
providing the information to the Board by an estimated 70,804 
respondents (51,800 producers, 15,000 seedstock producers, 3,318 market 
agencies, 571 first handlers, 100 feeders, and 15 exporters) is 
$989,840 or $13.98 per respondent. Each first handler and exporter 
responsible for the collection of assessments and remittance of the 
assessments to the Board, will do so by the 15th day of the month 
following the month in which lambs were purchased for slaughter, 
exported, or lambs or lamb products were marketed directly to a 
consumer. It is anticipated that the bulk of assessments will be 
submitted to the Board by first handlers who purchased lambs for 
slaughter. A person such as a producer or feeder is considered a first 
handler when that person markets lamb or lamb products of their own 
production directly to a consumer.
    The Order's provisions have been carefully reviewed, and every 
effort has been made to minimize any unnecessary recordkeeping costs or 
requirements.
    The forms will require the minimum information necessary to 
effectively carry out the requirements of the program, and their use is 
necessary to fulfill the intent of the Act. Such information can be 
supplied without data processing equipment or outside technical 
expertise. In addition, there are no additional training requirements 
for individuals filling out reports and remitting assessments to the 
Board. The forms will be simple, easy to understand, and place as small 
a burden as possible on the person required to file the information.
    The timing and frequency of collecting information are intended to 
meet the needs of the industry while minimizing the amount of work 
necessary to fill out the required reports. In addition, the 
information to be included on these forms is not available from other 
sources because such information relates specifically to individual 
producers, feeders, seedstock producers, first handlers, and exporters 
who are subject to the provisions of the Act. Therefore, there is no 
practical method for collecting the required information without the 
use of these forms.
    Information collection requirements that are included in this Order 
include:

(1) Background Information Form (AMS-755)

    Estimate of Burden: Public reporting for this collection of 
information is estimated to average 0.5 hours per response for each 
producer, feeder, seedstock producer, and first handler nominated to 
serve on the Board.
    Respondents: Producers, seedstock producers, feeders, and first 
handlers.
    Estimated number of Respondents: 10 (26 for initial nominations to 
the Board, 8 in the second year, and 8 in the third year).
    Estimated number of Responses per Respondent: 1 every 3 years.
    Estimated Total Annual Burden on Respondents: 13 hours for the 
initial nominations to the Board and 4 hours annually thereafter.
    Total Cost: $260 initial, $80 thereafter.

(2) Requirement to Maintain Records Sufficient to Verify Reports and 
Requests for Refunds Submitted Under the Order

    Estimate of Burden: Public recordkeeping burden for keeping this 
information is estimated to average 0.6 hours per record keeper 
maintaining such records.
    Recordkeepers: Producers, seedstock producers, feeders, market 
agencies, first handlers, and exporters.
    Estimated number of Recordkeepers: 71,039.
    Estimated Total Recordkeeping Hours: 42,623.4 hours.
    Total Cost: $852,468.

(3) Monthly Remittance Report Form (LS-81)

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 1 hour per first handler and 
exporter.
    Respondents: First handlers and exporters.
    Estimated Number of Respondents: 586.
    Estimated Number of Responses per Respondent: 12.
    Estimated Total Annual Burden on Respondents: 7,032 hours.
    Total Cost: $140,640.

(4) Application for Refund Form (LS-85)

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.25 hours per response.
    Respondents: Producers, seedstock producers, first handlers, 
feeders, and exporters.
    Estimated number of Respondents: 67,486.
    Estimated Total Annual Burden: 16,871.5 hours.
    Total Cost: $337,430.

(5) Application for Certification of Organization Form (LS-82)

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.5 hours per response.
    Respondents: National, State, or regional lamb associations or 
organizations.
    Estimated number of Respondents: 20.
    Estimated number of Responses per Respondent: 1
    Estimated Total Annual Burden: 10 hours.
    Total Cost: $200.

(6) Nomination for Appointment to the Lamb Board Form (LS-84)

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.5 hours per response.
    Respondents: National, State, or regional lamb associations and 
organizations.
    Estimated number of Respondents: 20.
    Estimated number of Responses per Respondent: 1 per year.
    Estimated Total Annual Burden: 10 hours.
    Total Cost: $200.

(7) Statement of Certification (Lamb Promotion, Research, and 
Information Order) (LS-83)

    Estimate of Burden: The Deputy Administrator or designee of the 
Agricultural Marketing Service's (AMS), Livestock and Seed Program will 
sign this form certifying eligible organizations to make nominations to 
the Board. Because only AMS employees will complete this form, the 
estimated average reporting burden would not apply to the public.
    The burden hours reported in the final rule reflect a decrease of 
141 hours from the proposed rule. This decrease was the result of a 
mathematical error in calculating the total number of respondents.
    In the proposed rule published September 21, 2001 [66 FR 48763], 
comments were invited on: (a) Whether the proposed collection of 
information is necessary for the proper performance of functions of the 
Order and the Department's oversight of the program, including whether 
the information will have practical utility; (b) the accuracy of the 
Department's estimate of the burden of the proposed collection of 
information, including the validity of the methodology and assumption 
used; (c) ways to enhance the quality, utility, and clarity of the 
information to be collected; and (d) ways to minimize the burden of the 
collection of information on those who are to respond, including the 
use of appropriate automated, electronic, mechanical, or other

[[Page 17852]]

technological collection techniques or other forms of information 
technology. No comments were received regarding the information 
collection section.

Background

    The Act authorizes the Department to establish agricultural 
commodity research and promotion orders. The Act provides for the 
submission of proposals for a lamb promotion, research, and information 
order by industry organizations or any other interested persons 
affected by the Act. Section 516 of the Act provides permissive terms 
for orders, and other sections provide for alternatives. For example, 
Sec. 514 of the Act provides for orders applicable to (1) producers, 
(2) first handlers, (3) feeders and others in the marketing chain as 
appropriate. Section 516 authorizes an order to provide for exemption 
of de minimis quantities of an agricultural commodity; different 
payment and reporting schedules; coverage of research, promotion, and 
information activities to expand, improve, or make more efficient the 
marketing or use of an agricultural commodity in both domestic and 
foreign markets; provision for reserve funds; provision for credits for 
generic and branded activities; and assessment of imports. In addition, 
Sec. 518 of the Act provides for referenda to ascertain approval of an 
order to be conducted either prior to its going into effect or within 3 
years after assessments first begin under the order. The Act authorizes 
three different voting methods for approving an order in a referendum. 
Section 515 provides for establishment of a board from among producers, 
seedstock producers, first handlers, feeders, and others in the 
marketing chain as appropriate.
    This Order includes provisions for both domestic and foreign market 
expansion and improvement and a delayed referendum to be conducted 
within 3 years after assessments begin. The Order will continue if a 
majority of those persons voting who also represent a majority of the 
volume of lambs produced, slaughtered or exported during the 
representative period established by the Department.
    The Act authorizes the establishment and operation of generic 
promotion programs that may include a combination of promotion, 
research, and information activities funded by mandatory assessments. 
These programs are designed to maintain and expand markets and uses for 
agricultural commodities. This Order provides for the development and 
financing of an effective and coordinated program of research, 
promotion, and information for lamb and lamb products. The purpose of 
the Order is to strengthen the position of lamb and lamb products in 
domestic and foreign markets, and to develop, maintain, and expand 
markets for lamb and lamb products. The Order will be continued subject 
to its approval in a delayed referendum conducted by the Department. 
Section 518 of the Act provides for the Department (1) to conduct a 
required referendum, preceding a proposed Order's effective date, among 
persons who would be subject to assessments under the program or (2) to 
implement a proposed Order, pending the conduct of a referendum, among 
persons subject to assessments, within 3 years after assessments first 
begin. In accordance with section 518(e) of the Act, an Order may 
provide for its approval in a referendum based upon (1) a majority of 
those persons voting; (2) persons voting for approval who represent a 
majority of the volume of the agricultural commodity; or (3) a majority 
of those persons voting for approval who also represent a majority of 
the volume of the agricultural commodity. This Order provides for a 
delayed referendum to be conducted using the third approval option. 
Thus, the Department will conduct a referendum within 3 years after 
assessments first begin, in which approval of the Order will be 
determined by a majority of persons voting for approval who also 
represent a majority of the volume of lamb production represented in 
the referendum. The Act also requires the Department to conduct 
subsequent referenda: (1) Not later than 7 years after assessments 
first begin under the Order; (2) at the request of the Board 
established under the Order; or (3) at the request of 10 percent or 
more of the number of persons eligible to vote. In addition to these 
criteria, the Act provides that the Department may conduct a referendum 
at any time to determine whether the continuation, suspension, or 
termination of the Order or a provision of the Order is favored by 
persons eligible to vote.
    The Order also contains provisions that will allow persons to 
request a refund of assessments paid during the period beginning on the 
effective date of the Order and ending on the date the Department 
announces the results of the required referendum. The refunds will be 
paid from an escrow account established by the Board as provided for in 
Sec. 1280.214(c). Persons who file a request for refunds during the 
specified time period will be entitled to a refund of assessments paid 
from the effective date of the Order until the Department announces the 
results of the referendum. If the amount in the escrow fund is less 
than the total refunds demanded, persons entitled to a refund will 
receive a pro rata share.
    A national research and promotion program for lamb and lamb 
products will help the industry to address the many market problems it 
currently faces. Domestic lamb producers have been competing with 
surging foreign lamb imports, competition from other meat and poultry, 
and changing consumer meat buying preferences.
    Increased funding will allow the industry to expand its current 
consumer, food service, and food manufacturer promotion efforts. Also 
it will allow for increased participation in the Department's Market 
Access Program and the opportunity to develop stronger markets 
overseas. In addition, such a program will create the opportunity to 
explore tie-in promotional activities with nationally branded food 
products that will help the lamb industry gain advertising and in-store 
exposure.
    The assessment levied on domestically-produced lamb will be used to 
pay for promotion, research, and information as well as administration, 
maintenance, and functioning of the Board. Expenses incurred by the 
Department in implementing and administering the Order, including 
referenda costs, also will be paid from assessments.
    Sections 516(e)(1) and (2) of the Act states that the Department 
may provide credits of assessments for generic and branded activities. 
The Order does not contain such provisions. Therefore, the terms 
generic activities and branded activities are not defined in the Order.
    First handlers and exporters will be responsible for the collection 
of assessments and remittance of assessments to the Board. First 
handlers and exporters will be required to maintain records of lambs 
purchased from each producer, seedstock producer, and feeder, by the 
first handler or exporter, including lambs produced or fed by the first 
handler or exporter. First handlers and exporters will be required to 
file reports regarding the collection, payment, and remittance of the 
assessments. In addition, a person who is a market agency; i.e., 
commission merchant, auction market, or livestock market in the 
business of receiving lambs for sale on commission for or on behalf of 
a producer, seedstock producer, or feeder will be required to collect 
the assessment and pass the collected assessments on to the subsequent 
purchaser and if applicable certify as required by regulations approved 
by the Department that the

[[Page 17853]]

provisions of Sec. 1280.217(b) have been met.
    All information obtained from persons subject to this Order as a 
result of recordkeeping and reporting requirements will be kept 
confidential by all officers, employees, and agents of the Department 
and of the Board. This information may be disclosed only if the 
Department considers the information relevant, and the information is 
revealed in a judicial proceeding or administrative hearing brought at 
the direction or on the request of the Department or to which the 
Department or any officer of the Department is a party. Other 
exceptions for disclosure of confidential information include the 
issuance of general statements based on reports or on information 
relating to a number of persons subject to an order if the statements 
do not identify the information furnished by any person, or the 
publication, by direction of the Department, of the name of any person 
violating the Order, and a statement of the particular provisions of 
the Order violated by the person.
    The Act requires that an order provide for the establishment of a 
board to administer the program under the Department's supervision. 
This Order provides for a 13-member Board to ensure fair and equitable 
representation of the lamb industry on the Board. The Act requires 
membership on the Board to reflect the geographical distribution of the 
production of lamb and lamb products. To that end, the Order divides 
the United States into two geographic regions with each region being 
represented by at least two lamb producers and the remaining two 
producers appointed at the Department's discretion. Such at large 
selections by the Department will not be chosen or bound by any 
specific geographic region. There will be three lamb feeder members on 
the Board. At least one feeder will feed less than 5,000 lambs 
annually, at least one feeder will feed 5,000 or more lambs annually 
and the remaining feeder will be appointed at the Department's 
discretion and will not be chosen or bound by size requirements. Three 
first handlers and one seedstock producer will be appointed as members 
of the Board. Members will serve for 3-year terms, except that the 
members appointed to the initial Board will serve proportionately for 
1, 2, and 3 years. No member will serve more than two consecutive 3-
year terms.
    Upon implementation of the Order and pursuant to the Act, the Board 
will at least once in each 5-year period, but not more frequently than 
once in each 3-year period, review the geographical distribution of 
lamb in the United States and make a recommendation to the Department 
after considering the results of its review and other information it 
deems relevant regarding the reapportionment of the Board.
    In response to invitations to submit proposals published in the 
Federal Register November 23, 1999 [64 FR 65665], and January 12, 2000 
[65 FR 1825], a proposed Order developed by the Lamb Industry Checkoff 
Exploration Team was submitted by the Proponent I. Proponent I proposed 
a program assessing lamb producers, feeders, first handlers, and 
seedstock producers. In addition, two partial proposals were submitted 
by Proponent II and Proponent III. Proponent II proposed definitions 
for feeder, producer, and seedstock producer and that the Department 
should be authorized to appoint only one feeder representative who 
annually feeds 5,000 or more head of lambs and to appoint two feeders 
who annually feed less than 5,000 head of lamb. Proponent III proposed 
that the Order be approved in a referendum by a majority of those 
voting.
    The Order is summarized as follows: Sections 1280.101 through 
1280.129 of the Order define certain terms such as lamb, producer and 
first handler, which are used in the Order.
    Sections 1280.201 through 1280.211 include provisions relating to 
the Board. These provisions cover establishment and membership, 
nominations, nominee's agreement to serve, appointment, vacancies, 
certification of organizations, term of office, compensation, removal, 
prohibited activities, and powers and duties of the Board, which is the 
governing body authorized to administer the Order through the 
implementation of programs, plans, projects, budgets, and contracts to 
promote and disseminate information about lamb and lamb products, 
subject to oversight of the Department.
    Sections 1280.212 through 1280.216 cover budget and expenses; 
require the Board to submit a budget for the fiscal year covering 
anticipated expenses and disbursements, investment of funds, escrow 
accounts, refunds, and procedures for obtaining a refund.
    Sections 1280.217 through 1280.221 cover lamb purchases and 
authorize the collection of assessments; specify limitations on the use 
of funds; and specify who pays the assessment and how.
    Sections 1280.222 through 1280.227 cover maintaining books and 
records, accounting for the receipt and disbursement of all funds; 
reports from each first handler to the Board including the number of 
lambs purchased and amount remitted, and use and confidentially of 
information. Also, every 5 years, the Board funds an independent 
evaluation of the program.
    Sections 1280.228 through 1280.236 discuss the rights of the 
Department; personal liability; separability; patents, copyrights, 
inventions, product formulations, and publications; amendments; 
referenda, which will be delayed (required referenda); suspension or 
termination; proceedings after termination; and effects of termination 
or amendment.
    On June 25, 2001, the United States Supreme Court issued a decision 
in the case of United States v. United Foods, Inc. (United Foods), that 
held that the imposition of mandatory assessments to fund generic 
mushroom advertising violated the First Amendment insofar as it 
required the mushroom industry to subsidize commercial speech with 
which they disagreed. The Court expressly declined to reach the 
question whether the generic advertising conducted under the mushroom 
program constitutes Government speech.

Comments

    AMS issued invitations to submit proposals for an Order in the 
November 23, 1999 [64 FR 65665], and January 12, 2000 [65 FR 1825], 
issues of the Federal Register. In response to invitations to submit 
proposals, a proposed Order developed by the Lamb Industry Checkoff 
Exploration Team was submitted by the Proponent I. Proponent I proposed 
a program assessing lamb producers, feeders, first handlers, and 
seedstock producers. In addition, two partial proposals were submitted 
by the Proponent II and Proponent III. Proponent II proposed 
definitions for feeder, producer, and seedstock producer and that the 
Department should be authorized to appoint only one feeder 
representative who annually feeds 5,000 or more head of lambs and to 
appoint two feeders who annually feed less than 5,000 head of lamb. 
Proponent III proposed that the Order be approved in a referendum by a 
majority of those voting. As provided in the Act, on September 21, 
2001, AMS published the proposed Order for comment [66 FR 48764]. The 
comment period ended November 20, 2001.
    The Department received 242 comments in a timely manner. In 
addition, six late comments were received. The late comments generally 
reflected the substance of comments timely received. The bulk of 
comments were submitted by individual lamb producers. About 49 comments 
were

[[Page 17854]]

received from organizations representing lamb producers, feeders, and 
farmers. The comments have been posted on AMS' website at (http://www.ams.usda.gov/lsg/mpb/rp-lamb.htm).
    The changes suggested by commenters are discussed below, along with 
the changes made by the Department upon further review. Also, the 
Department has made other miscellaneous changes for the purpose of 
clarity and accuracy. For the readers' convenience the discussion of 
comments is organized by the topic headings of the proposed rule.

Background Section

    One commenter stated that the background of the proposed Order 
gives an unworthy goal of trying to compete with imports and suggested 
that the goal should be to cooperate with importers to increase total 
lamb consumption. Section 1280.210(m) of the Order states that the duty 
of the Board is to work to achieve an effective, continuous, and 
coordinated program of promotion, research, and information designed to 
strengthen the lamb industry's position in the marketplace; maintain 
and expand existing markets and uses for lamb and lamb products; and to 
carry out programs, plans, and projects designed to provide maximum 
benefits to the lamb industry. The program will be funded entirely with 
assessments on the domestic lamb industry. Accordingly, this suggestion 
is not adopted.

Definitions

Section 1280.108  First Handler

    One commenter suggested that the definition of first handler should 
be modified to clarify that it is a packer. Section 1280.108 of the 
Order states that the term first handler ``means the packer or other 
person * * *''. The Department believes that the current definition 
sufficiently defines that the first handler includes packers. 
Accordingly, this change is not needed as a result of this comment.

Section 1280.111  Lamb

    One commenter suggested that the definition of lamb should be 
``every sheep sold, whatever age.'' The Department believes that the 
proposed definition of lamb, which uses the term ``ovine''--meaning of 
or relating to sheep--sufficiently indicates that all sheep are covered 
by the Order and is generally accepted by the industry. Accordingly, 
this suggestion is not adopted.

Lamb Promotion, Research, and Information Board

Section 1280.201  Establishment and membership

    One commenter suggested that the Board should have four producer 
members from west of the Mississippi and two producer members east of 
the Mississippi to more fairly represent the demographics of sheep 
producers and sheep numbers. Another commenter suggested that the size 
and geographic requirements for producer representatives on the Board 
should be relaxed. Due to geographical concerns and the size of 
producer operations issues to be considered when the Department is 
making appointments to the Board, the Department believes that simply 
changing the number of producers representing the regions could be 
unduly restrictive. However, Sec. 1280.201(a)(1) of the Order has been 
modified so that each region will be represented by at least two 
producers and that the remaining two producers will be appointed at the 
Department's discretion. Such at large selections by the Department 
will not be chosen or bound by any specific geographic region. This 
modification will allow the Department the flexibility to appoint 
producers as deemed necessary.
    One commenter suggested that producers should be able to vote for 
nominees to the Board. Section 1280.202 of the Order provides that only 
eligible certified organizations representing producers, feeders, first 
handlers, or seedstock producers may submit nominations for the Board 
for the Department's consideration. The membership of each certified 
organization is charged with nominating qualified individuals. 
Producers are members of such organizations and their interests are 
represented through these organizations. Accordingly, this suggestion 
is not adopted.
    One commenter suggested that the Board should be larger and more 
inclusive so that it fairly represents the entire industry. Two 
commenters suggested that packers need additional seats on the Board 
that would be representative of their financial contributions to the 
program. The Department believes that the Board accurately represents 
all interests of the industry--producers, feeders, seedstock producers, 
and packers. However, Sec. 1280.201 has been modified to provide first 
handlers with an additional seat to better reflect their participation 
in the industry. Accordingly, this suggestion has been adopted in part.
    One commenter suggested that the number of feeder representatives 
on the Board should be reduced to one and that the Board should have 
two ``friends of the industry'' members who have business experience in 
marketing. The Department believes that the proposed composition of the 
Board fairly represents the stakeholders of the industry and does not 
believe ``friends of the industry'' members are necessary. Therefore, 
this suggestion is not adopted.
    One commenter suggested that potential Board members should have 
business experience in finance, marketing, and distribution. Certified 
State, regional, or national organizations are charged with nominating 
the individuals they believe are most qualified to serve on the Board 
and may consider such criteria if they choose. Accordingly, this 
suggestion is not adopted.
    One commenter suggested that the Department may have difficulty 
complying with the criteria for appointing feeders in that it could be 
difficult to find a feeder of over 5,000 head annually east of the 
Mississippi. The commenter suggested that the language be modified to 
say ``at least'' one feeder who feeds more than 5,000 head annually as 
opposed to the current requirements of one feeder who feeds less than 
5,000 annually and two feeders who feed more than 5,000 head annually. 
The Department believes that this suggestion has merit because it may 
be difficult to find feeders who feed more than 5,000 head annually 
east of the Mississippi. In order to provide the Department greater 
flexibility in making appointments, Sec. 1280.201(a)(2) of the Order 
has been modified so that the Department will appoint at least one 
feeder representative who feeds 5,000 head or more annually and at 
least one feeder representative who feeds less than 5,000 head 
annually. The third feeder representative will be appointed at the 
Department's discretion and will not be chosen or bound by size 
requirements. Accordingly, this suggestion has been adopted in part.

Section 1280.202  Nominations

    Several commenters suggested that the number of Board members 
appointed from nominations submitted by any one certified organization 
should be limited to four. The Department believes that such a 
limitation could unduly restrict the Department from making 
appointments to the Board as well as unduly restrict the certified 
organizations from making nominations for appointment to the Board. 
Accordingly, this suggestion is not adopted.

[[Page 17855]]

Section 1280.210  Powers and Duties of the Board

    One commenter suggested that the Department should be required to 
issue an annual report detailing the Board's activities. Section 
1280.210(n) of the Order requires the Board to provide, not less than 
annually, a report accounting for the funds expended by the Board and 
describing programs implemented under the Act. Annual reporting by the 
Department as suggested by the commenter would be duplicative of the 
Board's actions. Accordingly, this suggestion is not adopted.
    Several commenters expressed concern that there will not be 
sufficient funds generated to carry out all three focus areas of the 
Order. Several other commenters suggested that all checkoff dollars 
should be used to develop and produce an advertising program for lamb 
and lamb products. The Act provides for a coordinated program of 
generic promotion, research, and information activities and places the 
responsibility with the Board, subject to approval of the Department, 
to ensure that funds are allocated among the focus areas of the Order. 
The Department believes that the Order provides the necessary framework 
for the Board to meet the objectives as set forth in the Act. 
Accordingly, this suggestion is not adopted.
    One commenter suggested that money for grower education efforts 
should be limited to project information and financial statements 
because too much money is spent on communicating with producers in 
other promotion programs. Board members will make recommendations, 
subject to the approval of the Department, as to how the checkoff 
dollars should be allocated among the various program areas. 
Accordingly, this suggestion is not adopted.
    One commenter suggested that there should be a limit on contracts 
to a contractor in that no single entity should be permitted to receive 
more than 50 percent of checkoff funds available each year for 
promotion, research, and information activities. The Department 
believes that it is best to provide flexibility to the Board when 
contracting for services. In addition, all contracts in which the Board 
enters will be subject to final approval by the Department. 
Accordingly, this suggestion is not adopted.
    One commenter suggested that funds from the national program should 
be used to supplement activities currently being conducted by State 
organizations. The Act does not provide authority for national program 
funds to be shared with State programs. However, the Act and Order do 
not prohibit the Board from conducting joint research, promotion, and 
information activities with State or national organizations. 
Accordingly, this suggestion is not adopted.

Section 1280.212  Budget and Expenses

    One commenter expressed concern that a majority of the assessments 
collected will be used for staffing and administrative costs. Section 
1280.212(g) of the Order limits the amount of money that can be used 
for administrative expenses to 10 percent of the Board's income for 
that fiscal year, except for the initial fiscal year.
    One commenter suggested that petitioners for a checkoff should have 
to reimburse the Department for any expenses to conduct a referendum. 
Section 518(c)(3) of the Act and Sec. 1280.233(b)(3) of the Order 
provide for eligible persons to request a referendum. Section 518(f) of 
the Act and Sec. 1280.233(d) of the Order state that the Board shall 
reimburse the Department for any expenses incurred by the Department to 
conduct referenda. Accordingly, no change is adopted as a result of 
this comment.

Section 1280.214  Refund Escrow Accounts

    One commenter suggested that the Board should have to set aside 100 
percent of funds so that 100 percent of the refund requests can be 
paid. Another commenter suggested that the Department should clarify 
that refunds requested prior to the announcement of the referendum 
results will be paid in full. Section 517(g) of the Act provides that 
ten percent of the assessments collected be placed in an escrow account 
and for a pro rata share to be paid if assessments are not sufficient 
to reimburse 100 percent of the refunds requested. The Act also states 
that refunds can only be provided after the results of the referendum 
are announced. Accordingly, this suggestion is not adopted.

Assessments

Section 1280.217  Lamb Purchases

    One commenter expressed confusion as to how assessments would be 
paid by an individual who sells lamb and lamb products of his own 
production directly to consumers. Sections 1280.217(c) and (e) of the 
Order state that each person processing or causing to be processed lamb 
or lamb products of that person's own production and marketing such 
lamb or lamb products is required to pay an assessment of one-half of a 
cent per pound on the live weight of the lamb at the time of slaughter. 
In addition, pursuant to Sec. 1280.108 of the Order, such individual 
would be considered a first handler and would be required by 
Sec. 1280.219 of the Order to pay an additional assessment of $.30 per 
head. As a first handler, the individual must remit the total amount of 
assessment to the Board.
    Several commenters suggested that packers should be required to pay 
more into the program. The rate of assessment was recommended in the 
proposal submitted by Proponent I based on recommendations by the Lamb 
Industry Checkoff Exploration Team in collaboration with other members 
of the industry. The Department believes that this assessment rate 
properly reflects the position of packers in the industry and is 
reasonable at this time. Accordingly, this suggestion is not adopted.
    Several commenters suggested that the Order should have a provision 
for assessing imported lamb and lamb products. Section 517(a) of the 
Act provides that importers may be assessed if they are covered under 
the Order. The proposed Order submitted by Proponent I did not provide 
for the assessment of imports. It is the desire of most of the industry 
at this time to exclude assessing imports so that ``American lamb'' can 
be promoted. If importers were to be assessed, this may not be 
possible. In the mid-1990's a Sheep and Wool Promotion, Research, 
Education, and Information Order was proposed to the lamb industry, 
which included importers. This proposed program was not approved in the 
referendum by producers, feeders and importers, and it is believed that 
including importers in the sheep program may have contributed to its 
failure. The Department does not believe that a change in this 
provision is warranted. Accordingly, this suggestion is not adopted.
    Several commenters believe that many producers may have to pay both 
a State and national checkoff due to current programs that are already 
in place at the State level. The commenters further assert that 
promotion programs that are now run through the State organizations 
will be hurt because of the loss of voluntary contributions that will 
likely occur when the national program is put in place. Many State 
checkoff programs are voluntary. Neither the Act nor the Order 
prohibits the Board from conducting joint research, promotion, and 
information activities with State or national organizations.

[[Page 17856]]

Miscellaneous

Section 1280.233  Referenda

    Several commenters oppose having the Order subject to continuance 
in a delayed referendum. The commenters suggested that those subject to 
the program should have the right to vote on its approval prior to 
beginning assessments. Section 518 of the Act provides for the 
Department (1) to conduct a required referendum, preceding a proposed 
Order's effective date, among persons who would be subject to 
assessments under the program or (2) to implement a proposed Order, 
pending the conduct of a referendum, among persons subject to 
assessments, within three years after assessments first begin. The 
proposed Order, which recommended approval in a delayed referendum, was 
drafted utilizing recommendations from both the Lamb Industry Checkoff 
Exploration Team and from those in the industry. A delayed referendum 
will provide those subject to the program ample time to judge its 
effectiveness. A delayed referendum will allow assessments to begin 
much more quickly so that the industry can implement promotions and 
other programs as soon as possible. Accordingly, this suggestion is not 
adopted.
    Numerous commenters suggested that continuance referenda should be 
conducted at various lengths of time, including from every 3 years to 
every 10 years, to determine if those subject to the program still 
favor its approval. Section 518(c) of the Act and Sec. 1280.233 of the 
Order state that the Department shall conduct subsequent referendum: 
(1) Not later than seven years after assessments first begin under the 
Order; (2) at the request of the Board established under the Order; or 
(3) at the request of ten percent or more of the number of persons 
eligible to vote. In addition, Sec. 518(d) of the Act provides that the 
Department may conduct a referendum at any time to determine whether 
continuation, suspension, or termination of the Order or a provision of 
the Order is favored by persons eligible to vote. The Department 
believes this provides ample opportunity for conducting additional 
referenda. Accordingly, the Department believes these suggestions are 
reflected in the Act and Order.
    Several commenters oppose allowing the Department the right to call 
for a referendum at any time. Section 518(d) of the Act provides that 
the Department may conduct a referendum at any time to determine 
whether continuation, suspension, or termination of the Order or a 
provision of the Order is favored by persons eligible to vote. 
Therefore, this suggestion is not adopted.
    One commenter suggested that a referendum should be required to 
increase the checkoff rate. While the Order contains no provision for 
this type of referendum, Sec. 1280.217(e) of the Order has been 
modified to clarify the process by which the assessment rate may be 
changed. Periodic referenda provide an opportunity for those that 
contribute to the program a chance to vote whether to continue, suspend 
or terminate the program. Accordingly, this suggestion is not adopted.
    Several commenters assert that it is unclear how voting by majority 
volume works and asked how the Department will determine a voter's 
volume. Another commenter suggested that eligible voters should be 
defined as producers, feeders, first handlers, and exporters, or their 
legal representatives who are at least 18 years of age. The Department 
will issue separate referendum rules at a later date that will describe 
the voting process.

General

    One commenter suggested that implementation of the Order will 
hinder the marketing efforts currently undertaken by lamb processors in 
cooperation with some importers. The Order does not preclude processors 
or other entities from conducting marketing activities with their own 
funds if they so choose. In addition, the Board may perform joint 
research, promotion, and information activities with processors to use 
checkoff dollars in a more effective and efficient manner.
    Several commenters suggested that because other checkoff programs 
are under legal challenge and because of the Supreme Court's ruling on 
the Mushroom Checkoff Program, a new checkoff program should not be 
implemented until the fate of the other programs is known. The 
Department believes and continues to be of the view that the Lamb 
Promotion, Research, and Information Order as previously proposed and 
with changes included in this action, is constitutionally sound. 
Accordingly, this suggestion is not adopted.
    A few commenters suggested that because the sheep industry voted 
down the last proposed checkoff program, a new program should not be 
implemented. The Department believes that a new lamb research and 
promotion program is appropriate at this time for several reasons. 
First, the lamb industry has undergone significant change since the 
last proposed Order was defeated. In addition, this program is 
substantially different from the previous program that was voted down. 
Finally, this new program is based in part on recommendations made by 
the ITC as part of conducting its investigation concerning the 
importation of lamb products. Therefore, this suggestion is not 
adopted.
    Several comments were submitted on issues that are not within the 
scope of this regulation (e.g., country of origin labeling, imported 
carcass grading, exchange rate with other countries, packer 
consolidation). Therefore, they will not be considered and will not be 
addressed herein.
    One commenter suggested that the Lamb Industry Checkoff Exploration 
Team should reconvene to discuss comments and concerns regarding the 
proposed checkoff. The Department is following the informal rulemaking 
process in which all comments submitted on the proposed Order have been 
taken into consideration and responded to by the Department. The 
proposed rule provided that all interested persons could comment, 
including the proponents. Accordingly, this suggestion is not adopted.
    The Department did not receive any comments on the two partial 
proposals that were published for comment in the proposed rule. The 
partial proposal submitted by Proponent II proposed also definitions 
for feeder, producer, and seedstock producer. These definitions are 
similar to those proposed by Proponent I. The Department believes that 
the definitions for the terms as proposed are clear and accurate. 
Accordingly, the Proponent II definitions have not been adopted. In 
addition, Proponent II proposed that the size requirements for 
appointing feeder representatives to the Board should be modified to 
provide feeders that feed less than 5,000 head of lamb annually with 
two seats on the Board. In order to provide the Department greater 
flexibility in making appointments, Sec. 1280.201(a)(2) of the Order 
has been modified so that the Department will appoint at least one 
feeder representative who feeds 5,000 head or more annually and at 
least one feeder representative who feeds less than 5,000 head 
annually. The third feeder representative will be appointed at the 
Department's discretion and will not be chosen or bound by size 
requirements. Accordingly, this partial proposal has been modified and 
accepted in part.
    The partial proposal submitted by Proponent III proposed that the 
final Order be subject to approval in a referendum by a majority of 
those persons voting for approval. In accordance with Section 518(e) of 
the Act, an Order may provide for its

[[Page 17857]]

approval in a referendum based upon (1) a majority of those persons 
voting; (2) persons voting for approval who represent a majority of the 
volume of the agricultural commodity; or (3) a majority of those 
persons voting for approval who also represent a majority of the volume 
of the agricultural commodity. The proposed Order, which was submitted 
by Proponent I based on recommendations by the Lamb Industry Checkoff 
Exploration Team in collaboration with other members of the industry, 
recommended that the third approval option be utilized. Accordingly, 
this proposal has not adopted.
    The Department has determined that this Order is consistent with 
and will effectuate the purposes of the Act. Pursuant to 5 U.S.C. 553, 
it is found and determined that good cause exists for not postponing 
the effective date of this rule until 30 days after publication in the 
Federal Register. This action establishes the Order, under the Act, by 
providing for an industry-funded promotion, research, and information 
program for lamb and lamb products including pelts but excluding wool 
and wool products. The program applies to all sales of sheep and lambs. 
By establishing this rule in a timely manner the domestic lamb industry 
can more readily begin a national promotion and research program for 
lamb and lamb products that will help the industry address the 
marketing difficulties it currently faces.
    Accordingly, this rule would benefit the lamb industry by allowing 
them to establish the Order and begin seeking ways to reverse the 
decline in the domestic lamb industry. The ITC in recommending relief 
from imports stressed the need for an industry marketing program 
supported by checkoff funds to improve production efficiency and 
increase demand. Given the current need for this checkoff program, it 
is necessary to implement these regulations as soon as possible.

List of Subjects in 7 CFR Part 1280

    Administrative practice and procedure, Advertising, Lamb and Lamb 
product, Consumer information, Marketing agreements, Reporting and 
record keeping requirements.

    For the reasons set forth in the preamble, Title 7 of Chapter XI of 
the Code of Federal Regulations is amended by adding part 1280 to read 
as follows:

PART 1280--LAMB PROMOTION, RESEARCH, AND INFORMATION ORDER

Subpart A--Lamb Promotion, Research, and Information Order

Definitions

Sec.
1280.101   Act.
1280.102   Board.
1280.103   Certified organization.
1280.104   Conflict of interest.
1280.105   Department.
1280.106   Exporter.
1280.107   Feeder.
1280.108   First handler.
1280.109   Fiscal period and marketing year.
1280.110   Information.
1280.111   Lamb.
1280.112   Lamb products.
1280.113   Order.
1280.114   Part and subpart.
1280.115   Person.
1280.116   Producer.
1280.117   Producer information.
1280.118   Promotion.
1280.119   Referendum.
1280.120   Research.
1280.121   Secretary.
1280.122   Seedstock producer.
1280.123   State.
1280.124 Suspend.
1280.125   Terminate.
1280.126   Unit.
1280.127   United States.
1280.128   Wool.
1280.129   Wool products.

Lamb Promotion, Research, and Information Board

1280.201   Establishment and membership.
1280.202   Nominations.
1280.203   Nominee's agreement to serve.
1280.204   Appointment.
1280.205   Vacancies.
1280.206   Certification of organizations.
1280.207   Term of office.
1280.208   Compensation.
1280.209   Removal.
1280.210   Powers and duties of the board.
1280.211   Prohibited activities.

Expenses

1280.212   Budget and expenses.
1280.213   Investment of funds.
1280.214   Refund escrow accounts.
1280.215   Refunds.
1280.216   Procedures for obtaining a refund.

Assessments

1280.217   Lamb purchases.
1280.218   Exporter.
1280.219   First handlers.
1280.220   Collections.
1280.221   Prohibition on use of funds.

Reports, Books, and Records

1280.222   Books and records of board.
1280.223   Reports.
1280.224   Periodic evaluation.
1280.225   Books and records of persons.
1280.226   Use of information.
1280.227   Confidentiality.

Miscellaneous

1280.228   Right of the Secretary.
1280.229   Personal liability.
1280.230   Separability.
1280.231   Patents, copyrights, inventions, product formulations, 
and publications.
1280.232   Amendments.
1280.233   Referenda.
1280.234   Suspension or termination.
1280.235   Proceedings after termination.
1280.236   Effect of termination or amendment.
1280.237   Rules and regulations.
1280.238   OMB Control numbers.

Subparts B-E--[Reserved]

    Authority: 7 U.S.C. 7411-7425.

Subpart A--Lamb Promotion, Research, and Information Order

Definitions


Sec. 1280.101  Act.

    Act means the Commodity Promotion, Research, and Information Act of 
1996 (7 U.S.C. 7411-7425; Pub. L. 104-127; 110 Stat. 1029, as amended), 
or any amendments thereto.


Sec. 1280.102  Board.

    Board means the Lamb Promotion, Research, and Information Board 
established pursuant to Sec. 1280.201.


Sec. 1280.103  Certified organization.

    Certified organization means any organization which has been 
certified by the Secretary pursuant to this part as being eligible to 
submit nominations for membership on the Board.


Sec. 1280.104  Conflict of Interest.

    Conflict of interest means a situation in which a member or 
employee of a board has a direct or indirect financial interest in a 
person that performs a service for, or enters into a contract with, a 
board for anything of economic value.


Sec. 1280.105  Department.

    Department means the United States Department of Agriculture.


Sec. 1280.106  Exporter.

    Exporter means any person who exports domestic live lambs from the 
United States.


Sec. 1280.107  Feeder.

    Feeder means any person who acquires ownership of lambs and feeds 
such lambs in the U.S. until they reach slaughter weight.


Sec. 1280.108  First handler.

    First handler means the packer or other person who buys or takes 
possession of lambs from a producer or feeder for slaughter, including 
custom

[[Page 17858]]

slaughter. If a producer or feeder markets lamb products directly to 
consumers, the producer or feeder shall be considered to be a first 
handler with respect to such lambs produced by the producer or feeder.


Sec. 1280.109  Fiscal period and marketing year.

    Fiscal period and marketing year means the 12-month period ending 
on December 31 or such other consecutive 12-month period as shall be 
recommended by the Board and approved by the Secretary.


Sec. 1280.110  Information.

    Information means information and programs that are designed to 
increase efficiency in producing lambs, to maintain and expand existing 
markets, and to develop new markets, marketing strategies, increased 
market efficiency, and activities that are designed to enhance the 
image of lamb and lamb products on a national or international basis. 
These include:
    (a) Consumer information, which means any action taken to provide 
information to, and broaden the understanding of, the general public 
regarding the consumption, use, and nutritional attributes of lamb and 
lamb products; and
    (b) Industry information, which means information and programs that 
will lead to the development of new markets, new marketing strategies, 
or increased efficiency for the lamb industry, and activities to 
enhance the image of lamb.


Sec. 1280.111  Lamb.

    Lamb means ovine animals of any age, including ewes and rams.


Sec. 1280.112  Lamb products.

    Lamb products means products produced in whole or in part from 
lamb, including pelts, and excluding wool and wool products.


Sec. 1280.113  Order.

    Order means an order issued by the Secretary under Sec. 514 of the 
Act that provides for a program of generic promotion, research, and 
information regarding agricultural commodities authorized under the 
Act.


Sec. 1280.114  Part and subpart.

    Part means the Lamb Promotion, Research, and Information Order and 
all rules and regulations issued pursuant to the Act and the Order. The 
Order shall be a subpart of the Part.


Sec. 1280.115  Person.

    Person means any individual, group of individuals, partnership, 
corporation, association, cooperative, or any other legal entity.


Sec. 1280.116  Producer.

    Producer means any person who owns and produces lambs in the United 
States for sale.


Sec. 1280.117  Producer information.

    Producer information means activities designed to provide 
producers, feeders, and first handlers with information relating to 
production or marketing efficiencies, development of new markets, 
program activities, or other information that would facilitate an 
increase in the demand for lambs or lamb products.


Sec. 1280.118  Promotion.

    Promotion means any action, including paid advertising and the 
dissemination of culinary and nutritional information and public 
relations with emphasis on new marketing strategies, to present a 
favorable image of U.S. lamb products to the public for the purpose of 
improving the competitive position of U.S. lamb and lamb products in 
the marketplace and to stimulate sales.


Sec. 1280.119  Referendum.

    Referendum means a referendum to be conducted by the Secretary 
pursuant to the Act whereby producers, feeders, first handlers, and 
exporters shall be given the opportunity to vote to determine whether 
the continuance of this subpart is favored by a majority of eligible 
persons voting and a majority of volume voting.


Sec. 1280.120  Research.

    Research means any type of test, study, or analysis designed to 
advance the image, desirability, use, marketability, production, 
product development, or quality of lamb or lamb products.


Sec. 1280.121  Secretary.

    Secretary means the Secretary of Agriculture of the United States 
or any other officer or employee of the Department to whom authority 
has heretofore been delegated, or to whom authority may hereafter be 
delegated, to act in the Secretary's stead.


Sec. 1280.122  Seedstock producer.

    Seedstock producer means any lamb producer in the U.S. who engages 
in the production and sale of breeding replacement lambs or semen or 
embryos.


Sec. 1280.123  State.

    State means each of the 50 States and the District of Columbia.


Sec. 1280.124  Suspend.

    Suspend means to issue a rule under Sec. 553 of title 5, U.S.C., to 
temporarily prevent the operation of an order or part thereof during a 
particular period of time specified in the rule.


Sec. 1280.125  Terminate.

    Terminate means to issue a rule under Sec. 553 of title 5, U.S.C., 
to cancel permanently the operation of an order or part thereof 
beginning on a date certain specified in the rule.


Sec. 1280.126  Unit.

    Unit means each State, group of States, or class designation 
(producers, feeders, first handlers, or seedstock producers) that is 
represented on the Board.


Sec. 1280.127  United States.

    United States means collectively the 50 States and the District of 
Columbia.


Sec. 1280.128  Wool.

    Wool means fiber from the fleece of a lamb.


Sec. 1280.129  Wool products.

    Wool products means products produced, in whole or in part, from 
wool and products containing wool fiber, excluding pelts.

Lamb Promotion, Research, and Information Board


Sec. 1280.201  Establishment and membership.

    (a) There is hereby established a Lamb Promotion, Research and 
Information Board of 13 members. Members of the Board shall be 
appointed by the Secretary from nominations submitted in accordance 
with this subpart. The seats shall be apportioned as follows:
    (1) Producers. There shall be six producer representatives on the 
Board appointed by the Secretary from nominations submitted pursuant to 
this subpart. For purposes of nominating and appointing producers to 
the Board, the United States as defined within this subpart shall be 
divided into two regions. Each region must be represented by at least 
two producers. The Secretary will appoint the remaining two producers 
to ensure that the criteria specified in paragraphs (a)(1)(i), (ii), 
and (iii) of this section are met. Region 1 shall include the 
geographic area east of the Mississippi River, which includes the 
following States: Maine, New Hampshire, Vermont, New York, 
Massachusetts, Connecticut, Pennsylvania, Rhode Island, New Jersey, 
Delaware, Maryland, District of Columbia, Virginia, West Virginia, 
North Carolina, South

[[Page 17859]]

Carolina, Georgia, Florida, Alabama, Mississippi, Tennessee, Kentucky, 
Ohio, Indiana, Michigan, Illinois and Wisconsin. Region 2 shall consist 
of all States west of the Mississippi River, which includes the 
following states: Minnesota, Iowa, Missouri, Arkansas, Louisiana, 
Texas, Oklahoma, Kansas, Nebraska, North Dakota, South Dakota, Montana, 
Wyoming, Colorado, New Mexico, Arizona, Utah, Idaho, Washington, 
Oregon, Nevada, California, Hawaii and Alaska. With regard to 
appointments to the Board, the Secretary shall ensure that the 
representation for producers on the Board shall meet the following 
criteria:
    (i) Two producers appointed to the Board shall own annually 100 or 
less head of lambs;
    (ii) One producer shall own annually between 101 and 500 head of 
lambs; and
    (iii) Three producers shall own more than 500 head of lambs 
annually.
    (2) Feeders. There shall be three feeder representatives on the 
Board appointed by the Secretary from nominations submitted pursuant to 
this subpart. The Secretary will appoint two feeder representatives to 
ensure that the criteria in paragraphs (a)(2)(i), (ii) and (iii) of 
this section are met. The third feeder representative will be appointed 
by the Secretary and will not be chosen or bound by size requirements.
    (i) At least one of the feeders appointed to the Board shall feed 
less than 5,000 head of lambs annually.
    (ii) At least one of the feeders appointed to the Board shall feed 
5,000 or more head of lambs annually.
    (iii) The Secretary shall ensure that the feeders appointed to the 
Board are not all located in one geographic region as established for 
producers pursuant to paragraph (a)(1) of this section.
    (3) First handlers. There shall be three first handler 
representatives appointed to the Board by the Secretary from 
nominations submitted pursuant to this subpart.
    (4) Seedstock producers. There shall be one seedstock producer 
appointed to the Board by the Secretary from nominations submitted 
pursuant to this subpart.
    (b) In soliciting nominations for the Board, the Secretary will 
request those nominating to identify specific categories in which 
nominees will qualify.
    (c) Adjustment of membership. At least once every 5 years, the 
Board will review the geographical distribution of the United States 
production of lambs. The review will be conducted using the National 
Agricultural Statistics Service inventory figures and the Board's 
annual assessment receipts. If warranted, the Board will recommend to 
the Secretary that the membership on the Board be adjusted to reflect 
changes in geographical distribution of domestic lamb production.


Sec. 1280.202  Nominations.

    All nominations authorized under this section shall be made in the 
following manner:
    (a) Nominations shall be obtained by the Secretary from eligible 
organizations certified under Sec. 1280.206. Certified eligible 
organizations representing producers, feeders, first handlers, or 
seedstock producers shall submit to the Secretary at least two nominees 
for each seat on the Board. If the Secretary determines that a unit is 
not represented by a certified eligible organization, then the 
Secretary may solicit nominations from other organizations or other 
persons residing in the unit.
    (b) After the establishment of the initial Board, the Department 
shall announce when a vacancy does or will exist. Nomination for 
subsequent Board members shall be submitted to the Secretary not less 
than 60 days prior to the expiration of the terms of the members whose 
terms are expiring, in the manner as described in this section. In the 
case of vacancies due to reasons other than the expiration of a term of 
office, successor Board members shall be appointed pursuant to 
Sec. 1280.205.
    (c) When there is more than one certified eligible organization 
representing the unit or when the Secretary solicits nominations from 
organizations and persons residing in that unit, they may caucus and 
jointly nominate, two qualified persons for each position representing 
that unit on the Board for which a member is to be appointed. If joint 
agreement is not reached with respect to any such nominations, or if no 
caucus is held, each eligible organization may submit to the Secretary 
two nominees for each appointment to be made to represent that unit.


Sec. 1280.203  Nominee's agreement to serve.

    Any producer, feeder, first handler, or seedstock producer 
nominated to serve on the Board shall file with the Secretary at the 
time of the nomination a written agreement to:
    (a) Serve on the Board if appointed;
    (b) Disclose any relationship with any lamb promotion entity or 
with any organization that has or is being considered for a contractual 
relationship with the Board; and
    (c) Withdraw from participation in deliberations, decision-making, 
or voting on matters that concern the relationship disclosed under 
paragraph (b) of this section.


Sec. 1280.204  Appointment.

    From the nominations made pursuant to Sec. 1280.202, the Secretary 
shall appoint the members of the Board on the basis of representation 
provided in Sec. 1280.201.


Sec. 1280.205  Vacancies.

    To fill any vacancy occasioned by the death, removal, resignation, 
or disqualification of any member of the Board, the Secretary shall 
appoint a successor from the most recent list of nominations for the 
position or the Secretary shall request nominations for a successor 
pursuant to Sec. 1280.202 and such successor shall be appointed 
pursuant to Sec. 1280.204.


Sec. 1280.206  Certification of organizations.

    (a) In General. The eligibility of State, regional, or national 
organizations to represent producers, seedstock producers, feeders, and 
first handlers and to participate in the making of nominations under 
this subpart shall be certified by the Secretary. The Secretary shall 
certify any organization that the Secretary determines meets the 
eligibility criteria established under paragraphs (b) and (c) of this 
section. An eligibility determination by the Secretary shall be final.
    (b) Basis for Certification. Certification shall be based upon, in 
addition to other available information, a factual report submitted by 
the organization that shall contain information considered relevant and 
specified by the Secretary, including:
    (1) The geographic territory covered by the active membership of 
the organization;
    (2) The nature and size of the active membership of the 
organization, including the number of active producers, seedstock 
producers, feeders, or first handlers represented by the organization;
    (3) Evidence of stability and permanency of the organization;
    (4) Sources from which the operating funds of the organization are 
derived;
    (5) The functions of the organization; and
    (6) The ability and willingness of the organization to further the 
purpose and objectives of the Act.
    (c) Primary Considerations. The primary considerations in 
determining the eligibility of an organization under this paragraph 
shall be whether:
    (1) The membership of the organization consists primarily of 
producers, seedstock producers, feeders, or first handlers who market 
or handle

[[Page 17860]]

a substantial quantity of lamb or lamb products; and
    (2) A primary purpose of the organization is in the production or 
marketing of lamb or lamb products.


Sec. 1280.207  Term of office.

    (a) The members of the Board shall serve for a term of 3 years, 
except that the members appointed to the initial Board shall serve 
proportionately for terms of 1-year, 2-years, and 3-years.
    (b) No member may serve more than two consecutive 3-year terms.
    (c) Each member shall continue to serve until a successor is 
appointed by the Secretary and has accepted the position.


Sec. 1280.208  Compensation.

    Board members shall serve without compensation, but shall be 
reimbursed for their reasonable expenses incurred in performing their 
duties as members of the Board.


Sec. 1280.209  Removal.

    If the Secretary determines that any person appointed under this 
part fails or refuses to perform his or her duties properly or engages 
in acts of dishonesty or willful misconduct, the Secretary shall remove 
the person from office. A person appointed under this part or any 
employee of the Board may be removed by the Secretary if the Secretary 
determines that the person's continued service would be detrimental to 
the purposes of the Act.


Sec. 1280.210  Powers and duties of the Board.

    The Board shall have the following powers and duties:
    (a) To administer this subpart in accordance with its terms and 
provisions;
    (b) To develop and recommend to the Secretary for approval such 
bylaws as may be necessary to administer the Order, including 
activities authorized to be carried out under the Order;
    (c) To meet not less than annually, organize, and select from among 
the members of the Board a Chairperson, Vice Chairperson, Secretary/
Treasurer, other officers, and committees and subcommittees, as the 
Board determines to be appropriate;
    (d) To prepare and submit for the approval of the Secretary, fiscal 
year budgets in accordance with Sec. 1280.212.
    (e) To employ persons, other than the members, as the Board 
considers necessary to assist the Board in carrying out its duties, and 
to determine the compensation and specify the duties of the persons;
    (f) To develop and submit plans and projects to the Secretary for 
the Secretary's approval, and to enter into contracts or agreements, 
which must be approved by the Secretary before becoming effective, for 
the development and carrying out of programs or projects of research, 
information (including producer information), or promotion, and the 
payment of costs thereof with funds collected pursuant to this subpart. 
Each contract or agreement shall provide that any person who enters 
into a contract or agreement with the Board shall develop and submit to 
the Board a proposed activity; keep accurate records of all of its 
transactions relating to the contract or agreement; account for funds 
received and expended in connection with the contract or agreement; 
make periodic reports to the Board of activities conducted under the 
contract or agreement; and make such other reports available as the 
Board or the Secretary considers relevant. Any contract or agreement 
shall provide that:
    (1) The contractor or agreeing party shall develop and submit to 
the Board a program, plan, or project together with a budget or budgets 
that shall show the estimated cost to be incurred for such program, 
plan, or project;
    (2) The contractor or agreeing party shall keep accurate records of 
all its transactions and make periodic reports to the Board of 
activities conducted, submit accounting for funds received and 
expended, and make such other reports as the Secretary or the Board may 
require;
    (3) The Secretary may audit the records of the contracting or 
agreeing party periodically; and,
    (4) Any subcontractor who enters into a contract with a Board 
contractor and who receives or otherwise uses funds allocated by the 
Board shall be subject to the same provisions as the contractor.
    (g) To receive, investigate, and report to the Secretary complaints 
of violations of the Order;
    (h) To recommend to the Secretary such amendments to the Order as 
the Board considers appropriate;
    (i) To maintain such records and books and prepare and submit such 
reports and records from time to time to the Secretary as the Secretary 
may prescribe; to make appropriate accounting with respect to the 
receipt and disbursement of all funds entrusted to it; and to keep 
records that accurately reflect the actions and transactions of the 
Board;
    (j) To cause its books to be audited by a competent auditor at the 
end of each fiscal year and at such other times as the Secretary may 
request, and to submit a report of the audit directly to the Secretary;
    (k) To give the Secretary the same notice of meetings of the Board 
as is given to members in order that the Secretary's representative(s) 
may attend such meetings, and to keep and report minutes of each 
meeting of the Board to the Secretary;
    (l) To furnish to the Secretary any information or records that the 
Secretary may request;
    (m) To work to achieve an effective, continuous, and coordinated 
program of promotion, research, and information (including producer 
information), designed to strengthen the lamb industry's position in 
the marketplace; maintain and expand existing markets and uses for lamb 
and lamb products; and to carry out programs, plans, and projects 
designed to provide maximum benefits to the lamb industry;
    (n) To provide not less than annually a report to producers, 
feeders and first handlers, accounting for the funds expended by the 
Board, and describing programs implemented under the Act; and to make 
such report available to the public upon request;
    (o) To invest funds in accordance with Sec. 1280.213.


Sec. 1280.211  Prohibited activities.

    The Board may not engage in, and shall prohibit the employees and 
agents of the lamb industry from engaging in:
    (a) Any action that would be a conflict of interest;
    (b) Using funds collected under the Order to undertake any action 
for the purpose of influencing legislation or governmental action or 
policy, other than recommending to the Secretary amendments to the 
Order; and
    (c) Any advertising, including promotion, research, and information 
activities authorized to be carried out under the order, that may be 
false or disparaging to another agricultural commodity.

Expenses


Sec. 1280.212  Budget and expenses.

    (a) The Board shall prepare and submit to the Secretary a budget 
for the fiscal year covering its anticipated expenses and disbursements 
in administering, this subpart. The budget shall be submitted before 
the beginning of each fiscal year, and as frequently as may be 
necessary thereafter.
    (b) Subject to this section, any amendment or addition to an 
approved budget must be approved by the Secretary, including shifting 
funds from one program, plan, or project to another.
    (c) The Board is authorized to incur such expenses, including 
provision for a reasonable reserve, as the Secretary finds are 
reasonable and likely to be

[[Page 17861]]

incurred by the Board for its maintenance and functioning, and to 
enable it to exercise its powers and perform its duties in accordance 
with the provisions of this subpart. Such expenses shall be paid from 
funds received by the Board.
    (d) With approval of the Secretary, the Board may borrow money for 
the payment of administrative expenses, subject to the same fiscal, 
budget, and audit controls as other funds of the Board. Any funds 
borrowed by the Board shall be expended only for startup costs and 
capital outlays and are limited to the first year of operation of the 
Board.
    (e) The Board may accept voluntary contributions, but these shall 
only be used to pay expenses incurred in the conduct of programs, 
plans, and projects. Such contributions shall be free from any 
encumbrance by the donor and the Board shall retain complete control of 
their use.
    (f) The Board shall reimburse the Secretary for all expenses 
incurred by the Secretary in the implementation, administration, and 
supervision of the Order, including all referendum costs in connection 
with the Order.
    (g) The Board may not expend for administration, maintenance, and 
functioning of the Board in any fiscal year an amount that exceeds 10 
percent of the assessments and other income received by the Board for 
that fiscal year, except for the initial fiscal year. Reimbursements to 
the Secretary required under paragraph (f) of this section are excluded 
from this limitation on spending.


Sec. 1280.213  Investment of funds.

    The Board may invest, pending disbursement, funds it receives under 
this subpart, only in obligations of the United States or any agency 
thereof, in general obligations of any State or any political 
subdivision thereof, in any interest-bearing account or certificate of 
deposit of a financial institution that is a member of the Federal 
Reserve System, or in obligations fully guaranteed as to principal and 
interest by the United States. Income from any such investment may be 
used for any purpose for which the invested funds may be used.


Sec. 1280.214  Refund escrow accounts.

    (a) The Board shall establish an interest bearing escrow account 
with a financial institution which is a member of the Federal Reserve 
System and will deposit into such account an amount equal to the 
product obtained by multiplying:
    (1) The total amount of assessments collected by the Board during 
the period beginning on the effective date of the Order and ending on 
the date the Secretary announces the results of the required 
referendum; by
    (2) Ten percent (10 percent)
    (b) The Board shall pay refunds of assessments to eligible persons 
requesting refunds during the period beginning on the effective date of 
the Order and ending on the date the Secretary announces the results of 
the required referendum in the manner specified in paragraph (c) of 
this section.
    (c) If the amount deposited in the escrow account is less than the 
amount of refunds requested, the Board shall prorate the amount 
deposited in such account among all eligible persons who request a 
refund of assessments paid no later than the date the required 
referendum results are announced by the Secretary.


Sec. 1280.215  Refunds.

    Any producer, seedstock producer, feeder, first handler, or 
exporter from whom an assessment is collected and remitted to the 
Board, or who pays an assessment directly to the Board, under authority 
of the Act and this subpart through the announcement of the results of 
the required referendum, and who is not in favor of supporting the 
promotion and research program as provided for in this subpart, shall 
have the right to receive from the Board a refund of such assessment, 
or a pro rata share thereof, upon submission of proof satisfactory to 
the Board that the producer, seedstock producer, feeder, first handler, 
or exporter paid the assessment for which refund is sought. Any such 
demand shall be made by such producer, seedstock producer, feeder, 
first handler, or exporter in accordance with the provisions of this 
subpart and in a manner consistent with regulations recommended by the 
Board and prescribed by the Secretary.


Sec. 1280.216  Procedure for obtaining a refund.

    Each producer, seedstock producer, feeder, first handler, or 
exporter who pays an assessment pursuant to the Act and this subpart 
during the period beginning on the effective date of the Order and 
ending on the date the required referendum results are announced may 
obtain a refund of such assessment only by following the procedures 
prescribed in this section and any regulations recommended by the Board 
and prescribed by the Secretary.
    (a) Application form. A producer, seedstock producer feeder, first 
handler, or exporter shall obtain a Board-approved refund application 
form from the Board. Such form may be obtained by written request to 
the Board and the request shall bear the producer's, seedstock 
producer's, feeder's, first handler's, or exporter's signature or 
properly witnessed mark.
    (b) Submission of refund application to Board. Any producer, 
seedstock producer, feeder, first handler, or exporter requesting a 
refund shall submit an application on the prescribed form to the Board 
within 60 days from the date the assessments were paid by such 
producer, seedstock producer, feeder, first handler, or exporter but no 
later than the date the results of the required referendum are 
announced by the Secretary. The refund application shall show:
    (1) The producer's, seedstock producer's, feeder's, first 
handler's, or exporter's name and address;
    (2) Name and address of the person who collected applicant's 
assessment;
    (3) Number of head of lambs, weight of lambs, or its equivalent, on 
which a refund is requested;
    (4) Total amount of refund requested;
    (5) Date or inclusive dates on which assessments were paid;
    (6) Certification that the producer, seedstock producer, feeder, 
first handler, or exporter did not collect the assessment from another 
producer, seedstock producer, feeder, first handler; or exporter or 
documentation of assessments collected from others; and
    (7) The producer's, seedstock producer's, feeder's, first 
handler's, or exporter's signature or properly witnessed mark.
    (c) Proof of payment of assessments. The documentation provided 
pursuant to Sec. 1280.225(b) to the producer, seedstock producer, 
feeder, first handler, or exporter by the person responsible for 
collecting an assessment pursuant to this subpart, or a copy thereof, 
or such other evidence deemed satisfactory to the Board, shall 
accompany the producer's, seedstock producer's, feeder's, first 
handler's, or exporter's refund application.
    (d) Payment of refunds. The Board shall initiate payment of refund 
requests, or pay a pro rata share thereof, within 90 days of the date 
the results of the required referendum are released by the Secretary. 
Refunds shall be paid in a manner consistent with Sec. 1280.214.

[[Page 17862]]

Assessments


Sec. 1280.217  Lamb purchases.

    (a) Except as prescribed by regulations approved by the Secretary, 
each first handler, or exporter making payment to a producer, seedstock 
producer, or feeder for lambs purchased from such producer, seedstock 
producer, or feeder shall collect an assessment from the producer, 
seedstock producer, or feeder. Each producer, seedstock producer, or 
feeder shall pay such assessment to the first handler or exporter, at 
the rate of one-half cent ($.005) per pound of live lambs sold.
    (b) Except as otherwise specified in this subpart, a person shall 
not be considered a producer, seedstock producer, or feeder within the 
meaning of this subpart if;
    (1) The person's only share in the proceeds of a sale of lambs is a 
sales commission, handling fee, or other service fee; or
    (2) The person:
    (i) Acquired ownership of the lambs to facilitate the transfer of 
ownership of such lambs from the seller to a third party,
    (ii) Resold such lambs no later than 10 days from the date on which 
the person acquired ownership, and
    (iii) Certified, as required by regulations recommended by the 
Board and prescribed by the Secretary, that the requirements of this 
provision have been satisfied.
    (c) Each person processing or causing to be processed lambs or lamb 
products of that person's own production and marketing such lambs or 
lamb products, shall pay an assessment on such lambs or lamb products 
on the live weight of the lamb at the time of slaughter at the rate 
established in paragraph (e) of this section. In addition, pursuant to 
Sec. 1280.108, such individual would be considered a first handler and 
would be required by Sec. 1280.219 to pay an additional assessment of 
$.30 per head. As the first handler, the individual must remit the 
total amount of assessment to the Board.
    (d) A person who is a market agency; i.e. commission merchant, 
auction market, or livestock market in the business of receiving lambs 
for sale or commission for or on behalf of a producer, seedstock 
producer, or feeder shall collect an assessment from the producer, 
seedstock producer, or feeder and shall pass the collected assessments 
on to the subsequent purchaser pursuant to this subpart and regulations 
recommended by the Board and prescribed by the Secretary.
    (e) Rate. Except as otherwise provided, the rate of assessment 
shall be one-half of a cent ($.005 per pound) per pound on all live 
lambs sold. The rate of assessment may be raised or lowered no more 
than twenty-hundredths of a cent ($.002) in any one year. The Board may 
recommend any change to the Department. Prior to a change in the 
assessment rate, the Department will provide notice by publishing in 
the Federal Register any proposed changes with interested parties 
allowed to provide comment.
    (f) The collection of assessments pursuant to Sec. 1280.217, 
Sec. 1280.218, and Sec. 1280.219 shall begin with respect to lambs 
purchased, or lambs or lamb products marketed on or after the effective 
date established by the Secretary and shall continue until terminated 
or suspended by the Secretary.
    (g) If the Board is not in place by the date the first assessments 
are to be collected, the Secretary shall have the authority to receive 
assessments and invest them on behalf of the Board, and shall pay such 
assessments and any interest earned to the Board when it is formed. The 
Secretary shall have the authority to promulgate rules and regulations 
concerning assessments and the collection of assessments, if the Board 
is not in place or is otherwise unable to develop such rules and 
regulations.
    (h) Payment remitted pursuant to this subpart shall be in the form 
of a negotiable instrument made payable to the Board. Such remittances 
and the reports specified in Sec. 1280.223 and Sec. 1280.225 shall be 
mailed to the location designated by the Board.


Sec. 1280.218  Exporter.

    Each person exporting live lambs shall remit to the Board an 
assessment on such lambs at the time of export at the rate established 
in Sec. 1280.217(e). An exporter directly exporting his or her own 
lambs shall remit an assessment to the Board at the rate established in 
Sec. 1280.217(e).


Sec. 1280.219  First handlers.

    Each first handler, in addition to remitting the assessment 
collected pursuant to Sec. 1280.217, shall pay an assessment equal to 
thirty cents ($.30) per head of lambs purchased by the first handler 
for slaughter or slaughtered by such first handler pursuant to a custom 
slaughter arrangement. The rates of assessment for first handlers shall 
be increased or decreased proportionately if the assessment paid by 
producers, seedstock producers, and feeders is increased or decreased. 
Such assessment shall be remitted with the assessments collected 
pursuant to Sec. 1280.217.


Sec. 1280.220  Collections.

    (a) Each first handler and each exporter responsible for the 
collection of assessments under this subpart shall remit assessments to 
the Board by the 15th day of the month following the month in which the 
lambs were purchased for slaughter or export, as required by 
regulations recommended by the Board and prescribed by the Secretary, 
has provided otherwise; or
    (b) If a first handler marketed lambs or lamb products directly to 
consumers, assessments shall be remitted to the Board by the 15th day 
of the month following the month in which the lambs or lamb products 
were marketed, as required by regulations recommended by the Board and 
prescribed by the Secretary, has provided otherwise.
    (c) Late payment charges. Any unpaid assessments due to the Board 
pursuant to Sec. 1280.217 shall be increased 2 percent each month 
beginning with the day following the date such assessments were due. 
Any remaining amount due, which shall include any unpaid charges 
previously made pursuant to this paragraph, shall be increased at the 
same rate on the corresponding day of each month thereafter until paid. 
For the purposes of this paragraph, any assessment determined at a date 
later than the date prescribed by this subpart, because of a person's 
failure to timely submit a report to the Board, shall be considered to 
have been payable by the date it would have been due if the report had 
been timely filed. The timeliness of a payment to the Board shall be 
based on the applicable postmark date or the date actually received by 
the Board, whichever is earlier.
    (d) Persons failing to remit total assessments due in a timely 
manner may also be subject to actions under Federal debt collection 
procedures.


Sec. 1280.221  Prohibition on use of funds.

    No funds collected by the Board under this subpart shall be used to 
undertake any action for the purpose of influencing legislation or 
governmental action or policy, other than recommending to the Secretary 
amendments to this subpart. A plan or project conducted pursuant to 
this title shall not make false or misleading claims on behalf of lamb 
or lamb products or disparage a competing product.

Reports, Books, and Records


Sec. 1280.222  Books and Records of Board.

    The Board shall:

[[Page 17863]]

    (a) Maintain such books and records, which shall be made available 
to the Secretary for inspection and audit, as the Secretary may 
prescribe,
    (b) Prepare and submit to the Secretary, from time to time, such 
reports as the Secretary may prescribe, and
    (c) Account for the receipt and disbursement of all funds entrusted 
to it. The Board shall cause its books and records to be audited by an 
independent auditor at the end of each fiscal year, and a report of 
such audit to be submitted to the Secretary.


Sec. 1280.223  Reports.

    Each first handler required to remit assessments to the Board for 
live lambs pursuant to Sec. 1280.217, each first handler marketing lamb 
products of that person's own production, and each exporter of lambs, 
shall report to the Board information pursuant to regulations 
recommended by the Board and prescribed by the Secretary. Such 
information may include but is not limited to the following:
    (a) The number of lambs purchased, initially transferred or which, 
in any other manner, is subject to the collection of assessment, the 
total weight in pounds, and the dates of such transactions;
    (b) The number of lambs exported; the total weight in pounds of 
lambs exported;
    (c) The amount of assessment remitted;
    (d) The basis; if necessary, to show why the remittance is less 
than the total weight in pounds of lamb multiplied by the assessment 
rate;
    (e) The date any assessment was paid.


Sec. 1280.224  Periodic evaluation.

    Pursuant to the Federal Agriculture Improvement and Reform Act of 
1996 (7 U.S.C. 7401), the Board shall, not less often than every 5 
years, authorize and fund, from funds otherwise available to the Board, 
an independent evaluation of the effectiveness of the Order and other 
programs conducted by the Board. The Board shall submit to the 
Secretary, and make available to the public, the results of each 
periodic independent evaluation conducted under this paragraph.


Sec. 1280.225  Books and records of persons.

    (a) Each first handler, exporter of lambs, and market agency shall 
maintain and make available for inspection such books and records as 
may be required by regulations recommended by the Board and prescribed 
by the Secretary, including records necessary to verify any required 
reports. Such records shall be maintained for at least 2 years beyond 
the fiscal period of their applicability.
    (b) Document evidencing payment of assessments. Each person, 
including first handlers, exporters and market agencies, responsible 
for collecting an assessment paid pursuant to this subpart is required 
to give the person from whom the assessment was collected, written 
evidence of payment of the assessments paid pursuant to this subpart. 
Such written evidence serving as a receipt shall include, but not be 
limited to, the following information:
    (1) Name and address of the person collecting the assessment.
    (2) Name of person who paid assessment.
    (3) Number of head of lamb sold.
    (4) Total weight in pounds of lamb sold.
    (5) Total assessments paid by the producer, seedstock producer, or 
feeder.
    (6) Date of sale.
    (7) Such other information as the Board, with the approval of the 
Secretary, may require.


Sec. 1280.226  Use of information.

    Information from records or reports required pursuant to this 
subpart shall be made available to the Secretary as is appropriate to 
the administration or enforcement of the Act, subpart or any regulation 
issued under the Act. In addition, the Secretary may authorize the use, 
under this part, of information regarding person paying producers, 
seedstock producers, feeders, first handlers, or exporters that is 
accumulated under laws or regulations other than the Act or regulations 
issued under the Act.


Sec. 1280.227  Confidentiality.

    All information obtained from books, records, or reports under the 
Act, this subpart, and the regulations issued thereunder shall be kept 
confidential by all persons, including all employees and former 
employees of the Board, all officers and employees and former officers 
and employees of contracting and subcontracting agencies or agreeing 
parties having access to such information. Such information shall not 
be available to Board members, producers, seedstock producers, feeders, 
exporters, or first handlers. Only those persons having a specific need 
for such information to effectively administer the provisions of this 
subpart shall have access to such information. Only such information so 
obtained as the Secretary deems relevant shall be disclosed by them, 
and then only in a judicial proceeding or administrative hearing 
brought at the direction, or on the request, of the Secretary, or to 
which the Secretary or any officer of the United States is a party. 
Nothing in this section shall be deemed to prohibit:
    (a) The issuance of general statements based upon the reports of 
the number of persons subject to this subpart or statistical data 
collected therefrom, which statements do not identify the information 
furnished by any person; and
    (b) The publication, by direction of the Secretary, of the name of 
any person violating this subpart, together with a statement of the 
particular provisions of this subpart violated by such person.

Miscellaneous


Sec. 1280.228  Right of the Secretary.

    All fiscal matters, programs, plans, or projects, rules or 
regulations, reports, or other substantive actions proposed and 
prepared by the Board shall be submitted to the Secretary for approval.


Sec. 1280.229  Personal liability.

    No member or employee of the Board shall be held personally 
responsible, either individually or jointly, in any way whatsoever to 
any person for errors in judgment, mistakes, or other acts, either of 
commission or omission, as such member or employee, except for acts of 
dishonesty or willful misconduct.


Sec. 1280.230  Separability.

    If any provision of the subpart is declared invalid or the 
applicability thereof to any person or circumstance is held invalid, 
the validity of the remainder of this subpart, or the applicability 
thereof to other persons or circumstances shall not be affected 
thereby.


Sec. 1280.231  Patents, copyrights, inventions, product formulations, 
and publications.

    (a) Any patents, copyrights, inventions or publications developed 
through the use of funds collected by the Board under the provisions of 
this subpart shall be the property of the U.S. Government as 
represented by the Board, and shall, along with any rents, royalties, 
residual payments, or other income from the rental, sale leasing, 
franchising, or other uses of such patents, copyrights, inventions, or 
publication, inure to the benefit of the Board. Upon termination of 
this subpart, Sec. 1280.235 shall apply to determine the disposition of 
all such property.
    (b) Should patents, copyrights, inventions or publications be 
developed through the use of funds collected by the Board under this 
subpart and funds contributed by another organization or person, 
ownership and related rights to such patents, copyrights, inventions or

[[Page 17864]]

publications shall be determined by agreement between the Board and the 
party contributing funds towards the development of such patent, 
copyright, invention or publication in a manner consistent with 
paragraph (a) of this section.


Sec. 1280.232  Amendments.

    Amendments to this subpart may be proposed, from time to time, by 
the Board or by any interested persons affected by the provisions of 
the Act, including the Secretary.


Sec. 1280.233  Referenda.

    (a) Required referendum. For the purpose of ascertaining whether 
the persons subject to this part favor the continuation, suspension, or 
termination of this part, the Secretary shall conduct a referendum 
among persons subject to assessments under Sec. 1280.217, 
Sec. 1280.218, and Sec. 1280.219 who, during a representative period 
determined by the Secretary, have engaged in the production, feeding, 
handling, or slaughter of lamb; or the exportation of lamb.
    (1) Time for referendum. The referendum shall be conducted not 
later than 3 years after assessments first begin under this part.
    (2) Approval of part. This part may be approved in a referendum by 
a majority of those persons voting for approval who also represent a 
majority of the volume of lamb produced, fed, slaughtered, handled, and 
exported.
    (b) Subsequent referenda. The Secretary shall conduct a subsequent 
referendum:
    (1) Not later than 7 years after assessments first begin under this 
part;
    (2) At the request of the Board established pursuant to 
Sec. 1280.201; or
    (3) At the request of 10 percent or more of the lamb producers, 
seedstock producers, feeders, first handlers, and exporters eligible to 
vote to determine if the persons favor the continuation, suspension, or 
termination of this part.
    (c) Other referenda. The Secretary may conduct a referendum at any 
time to determine whether the continuation, suspension or termination 
of this part or a provision of this part is favored by lamb producers, 
seedstock producers, feeders, first handlers, and exporters eligible to 
vote.
    (d) Costs of referenda. The Board shall reimburse the Secretary for 
any expenses incurred by the Secretary to conduct referenda.
    (e) Manner of conducting referenda. A referendum conducted under 
this section with respect to this part shall be conducted in the manner 
determined by the Secretary to be appropriate.
    (1) Voting. Eligible voters may vote by mail ballot in the 
referendum or in person if so prescribed by the Secretary.
    (2) Notice. Not later than 30 days before a referendum is conducted 
under this section with respect to this part, the Secretary shall 
notify the eligible voters, in such manner as determined by the 
Secretary, of the period during which voting in the referendum will 
occur. The notice shall explain any registration and voting procedures 
established under this part.


Sec. 1280.234  Suspension or termination.

    (a) The Secretary shall suspend or terminate this part or subpart 
or a provision thereof if the Secretary finds that this part, subpart 
or a provision thereof obstructs or does not tend to effectuate the 
purposes of the Act,
    (b) If, as a result of a referendum the Secretary determines that 
this subpart is not approved, the Secretary shall:
    (1) Not later than 180 days after making the determination, suspend 
or terminate, as the case may be, collection of assessments under this 
subpart; and
    (2) As soon as practical, suspend or terminate, as the case may be, 
activities under this subpart in an orderly manner.


Sec. 1280.235  Proceedings after termination.

    (a) Upon the termination of this subpart, the Board shall recommend 
to the Secretary not more than five of its members to serve as trustees 
for the purpose of liquidating the affairs of the Board. Such persons, 
upon designation by the Secretary, shall become trustees of all funds 
and property owned, in possession of or under control of the Board, 
including claims for any funds unpaid or property not delivered or any 
other claim existing at the time of such termination.
    (b) The said trustees shall:
    (1) Continue in such capacity until discharged by the Secretary;
    (2) Carry out the obligations of the Board under any contracts or 
agreements entered into pursuant to this subpart;
    (3) From time to time account for all receipts and disbursements 
and deliver all property on hand, together with all books and records 
of the Board and of the trustees, to such person as the Secretary may 
direct; and
    (4) Upon the direction of the Secretary execute such assignments or 
other instruments necessary or appropriate to vest in such person full 
title and right to all of the funds, property, and claims vested in the 
Board or the same obligations as imposed upon the Board and the 
trustees.
    (c) Any person to whom funds, property, or claims have been 
transferred or delivered pursuant to this subpart shall be subject to 
the same obligations as imposed upon the Board and the trustees.
    (d) Any residual funds not required to defray the necessary 
expenses of liquidation shall be returned to the persons who 
contributed such funds, or paid assessments, or if not practicable, 
shall be turned over to the Department to be utilized, to the extent 
practicable, in the interest of continuing one or more of the lamb 
research or information programs hitherto authorized.


Sec. 1280.236  Effect of termination or amendment.

    Unless otherwise expressly provided by the Secretary, the 
termination of this subpart or any regulation issued thereunder, or the 
issuance of any amendment to either thereof, shall not:
    (a) Affect or waive any right, duty obligation or liability which 
shall have arisen or which may thereafter arise in connection with any 
provision of this subpart or any such rule or regulation issued 
thereunder;
    (b) Release or extinguish any violation of this subpart or of this 
subpart or of any rule or regulation issued thereunder; or
    (c) Affect or impair any rights or remedies of the United States, 
the Secretary or of any person, with respect to any such violation.


Sec. 1280.237  Rules and Regulations.

    The Secretary may prescribe such rules and regulations as may be 
necessary to effectively carry out the provisions of this subpart.


Sec. 1280.238  OMB Control Numbers.

    The control number for the information requirements assigned by the 
Office of Management and Budget pursuant to the Paperwork Reduction Act 
of 1995, 44 U.S.C. Chapter 35 is 0581-0198, except that the OMB control 
number for the nominee background form is 0505-0001.

Subparts B-E--[Reserved]

    Dated: April 5, 2002.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 02-8770 Filed 4-9-02; 8:45 am]
BILLING CODE 3410-02-P