[Federal Register Volume 68, Number 61 (Monday, March 31, 2003)]
[Rules and Regulations]
[Pages 15335-15338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7633]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 959

[Docket No. FV03-959-1 FR]


Onions Grown in South Texas; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule increases the assessment rate established for the 
South Texas Onion Committee (Committee) for the 2002-03 and subsequent 
fiscal periods from $0.05 to $0.085 per 50-pound equivalent of onions 
handled. The Committee locally administers the marketing order which 
regulates the handling of onions grown in South Texas. Authorization to 
assess onion handlers enables the Committee to incur expenses that are 
reasonable and necessary to administer the program. The fiscal period 
began August 1 and ends July 31. The assessment rate will remain in 
effect indefinitely unless modified, suspended, or terminated.

EFFECTIVE DATE: April 1, 2003.

FOR FURTHER INFORMATION CONTACT: Belinda G. Garza, Regional Manager, 
McAllen Marketing Field Office, Marketing Order Administration Branch, 
Fruit and Vegetable Programs, AMS, USDA, 1313 E. Hackberry, McAllen, 
Texas 78501; telephone: (956) 682-2833, Fax: (956) 682-5942; or George 
Kelhart, Technical Advisor, Marketing Order Administration Branch, 
Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue SW., 
STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-2491, Fax: 
(202) 720-8938.
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, Fax: (202) 720-8938, or E-mail: [email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement No. 143 and Order No. 959, both as amended (7 CFR part 959), 
regulating the handling of onions grown in South Texas, hereinafter 
referred to as the ``order.'' The order is effective under the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Under the marketing order now in effect, South Texas 
onion handlers are subject to assessments. Funds to administer the 
order are derived from such assessments. It is intended that the 
assessment rate as issued herein will be applicable to all assessable 
onions beginning on August 1, 2002, and continue until amended, 
suspended, or terminated. This rule will not preempt any State or local 
laws, regulations, or policies, unless they present an irreconcilable 
conflict with this rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. Such 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This rule increases the assessment rate established for the 
Committee for the 2002-03 and subsequent fiscal

[[Page 15336]]

periods from $0.05 to $0.085 per 50-pound equivalent of onions.
    The South Texas onion marketing order provides authority for the 
Committee, with the approval of USDA, to formulate an annual budget of 
expenses and collect assessments from handlers to administer the 
program. The members of the Committee are producers and handlers of 
South Texas onions. They are familiar with the Committee's needs and 
with the costs for goods and services in their local area, and are thus 
in a position to formulate an appropriate budget and assessment rate. 
The assessment rate is formulated and discussed in a public meeting, 
where all persons directly affected have an opportunity to participate 
and provide input.
    For the 2001-02 and subsequent fiscal periods, the Committee 
recommended and USDA approved, an assessment rate that would continue 
in effect from fiscal period to fiscal period unless modified, 
suspended, or terminated by USDA upon recommendation and information 
submitted by the Committee or other information available to USDA.
    The Committee met on July 11, 2002, and unanimously recommended 
2002-03 expenses of $127,002 for personnel, office, compliance, and 
partial promotion expenses. The assessment rate and specific funding 
for research and promotion projects were to be recommended at a later 
Committee meeting.
    The Committee subsequently met on October 8, 2002, and recommended 
2002-03 expenditures of $463,297 and an assessment rate of $0.085 per 
50-pound equivalent of onions. Ten of the 13 Committee members present 
voted in support of the $0.035 per 50-pound equivalent increase and 
three voted against it. The three Committee members voting against the 
recommendation were producer handlers who basically did not approve of 
the research and promotion budgets. In comparison, last year's budgeted 
expenditures were $449,190. The Committee recommended the increased 
rate to fund a major market development program to promote the 
consumption of South Texas onions. Without the increase, the 
Committee's reserve fund would drop to $16,053. The Committee believes 
a reserve that low would not be adequate for its operations.
    The major expenditures recommended by the Committee for the 2002-03 
fiscal period included $72,002 for administrative expenses, $35,000 for 
compliance, $260,500 for promotion, and $95,795 for research projects. 
Budgeted expenses for these items in 2001-02 were $75,190, $30,000, 
$254,000, and $90,000, respectively.
    The assessment rate recommended by the Committee was derived by 
dividing anticipated expenses by expected shipments of South Texas 
onions. At the October 2002 meeting, onion shipments for the fiscal 
period were estimated at 5.5 million 50-pound equivalents, which would 
have provided $467,500 in assessment income.
    Since then, however, the Committee has become aware that the South 
Texas onion acreage is approximately 26 percent less than last season's 
16,148-planted acres. The Committee met January 6, 2003, to discuss 
reports of the reduced acreage. Based on the estimated 26 percent 
reduced production, shipments are estimated to be 4,070,000 fifty-pound 
equivalents. The Committee recommended a 40 percent reduction to a 
market development program previously funded at $225,000 and a 50 
percent cut to three onion research projects. The revised $325,400 
budget for 2002-03 includes reductions of $90,000 and $47,898 in 
promotion and research, respectively. The Committee did not recommend a 
change in the proposed assessment rate.
    With shipments of 4,070,000 fifty-pound equivalents, assessment 
income in 2002-03 should total $345,950. Income derived from handler 
assessments should be adequate to cover budgeted expenses. Funds in the 
reserve (currently $204,350) would be kept within the maximum permitted 
by the order (approximately two fiscal periods' expenses, Sec.  
959.43).
    The assessment rate established in this rule will continue in 
effect indefinitely unless modified, suspended, or terminated by USDA 
upon recommendation and information submitted by the Committee or other 
available information.
    Although this assessment rate will be in effect for an indefinite 
period, the Committee will continue to meet prior to or during each 
fiscal period to recommend a budget of expenses and consider 
recommendations for modification of the assessment rate. The dates and 
times of Committee meetings are available from the Committee or USDA. 
Committee meetings are open to the public and interested persons may 
express their views at these meetings. USDA will evaluate Committee 
recommendations and other available information to determine whether 
modification of the assessment rate is needed. Further rulemaking will 
be undertaken as necessary. The Committee's 2002-03 budget has been 
reviewed and approved by USDA. Those for subsequent fiscal periods will 
be reviewed and, as appropriate, approved by USDA.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this rule on small entities. Accordingly, AMS has 
prepared this final regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 90 producers of onions in the production 
area and approximately 35 handlers subject to regulation under the 
marketing order. Small agricultural producers are defined by the Small 
Business Administration (SBA) (13 CFR 121.201) as those having annual 
receipts less than $750,000, and small agricultural service firms are 
defined as those whose annual receipts are less than $5,000,000.
    Most of the handlers are vertically integrated corporations 
involved in producing, shipping, and marketing onions. For the 2001-02 
fiscal period, the industry's 35 handlers shipped onions produced on 
16,148 acres with the average and median volume handled being 152,446 
and 136,810 fifty-pound bag equivalents, respectively. In terms of 
production value, total revenues for the 35 handlers were estimated to 
be $39.9 million, with average and median revenues being $1.1 million 
and $1.0 million, respectively.
    The South Texas onion industry is characterized by producers and 
handlers whose farming operations generally involve more than one 
commodity, and whose income from farming operations is not exclusively 
dependent on the production of onions. Alternative crops provide an 
opportunity to utilize many of the same facilities and equipment not in 
use when the onion production season is complete. For this reason, 
typical onion producers and handlers either produce multiple crops or 
alternate crops within a single year.
    Based on the SBA's definition of small entities, the Committee 
estimates that all of the 35 handlers regulated by the order would be 
considered small entities if only their spring onion revenues are 
considered. However,

[[Page 15337]]

revenues from other productive enterprises would likely push a large 
number of these handlers above the $5,000,000 annual receipt threshold. 
All of the 90 producers may be classified as small entities based on 
the SBA definition if only their revenue from spring onions is 
considered. When revenues from all sources are considered, a majority 
of the producers would not be considered small entities because 
receipts would exceed $750,000.
    This rule increases the assessment rate established for the 
Committee and collected from handlers for the 2002-03 and subsequent 
fiscal periods from $0.05 to $0.085 per 50-pound equivalent of onions. 
The Committee recommended 2002-03 expenditures of $463,297 and an 
assessment rate of $0.085 per 50-pound equivalent. The assessment rate 
of $0.085 is $0.035 higher than the 2001-02 rate.
    In October 2002, the major expenditures recommended by the 
Committee for the 2002-03 fiscal period included $72,002 for 
administrative expenses, $35,000 for compliance, $260,500 for 
promotion, and $95,795 for research projects. Budgeted expenses for 
these items in 2001-02 were $75,190, $30,000, $254,000, and $90,000, 
respectively. The Committee recommended the increased rate to fund a 
major market development program to promote the consumption of South 
Texas onions without having to draw a large amount from reserves.
    The Committee reviewed and recommended 2002-03 expenditures of 
$463,297, which included increases in research and promotion programs. 
Prior to arriving at this budget, the Committee considered information 
from various sources, including the Executive Committee and the 
Research and Market Development Subcommittees. Numerous alternative 
expenditure levels were discussed by these groups based upon the 
relative value of various research and promotion projects to the onion 
industry. The assessment rate of $0.085 per 50-pound equivalent of 
assessable onions was then determined by dividing the total recommended 
budget by the quantity of assessable onions, estimated at 5.5 million 
50-pound equivalents for the 2002-03 fiscal period.
    The quantity of assessable onions for the 2002-03 fiscal period was 
initially estimated at 5.5 million 50-pound equivalents. Thus, the 
$0.085 rate would have provided $467,500 in assessment income, and 
income derived from handler assessments would have been adequate to 
cover the $463,297 budget. This is approximately $4,203 above the 
anticipated expenses, which the Committee determined to be acceptable.
    As mentioned earlier, the Committee met again on January 6, 2003, 
to discuss reports of a 26 percent onion acreage reduction, and 
recommended an amended budget totaling $325,400, based on a revised 
production estimate of 4,070,000 fifty-pound equivalents. The revised 
budget includes reduced promotion and research expenditures of $170,500 
and $47,898, respectively. The Committee did not recommend changes to 
the proposed assessment rate.
    With shipments of 4,070,000 fifty-pound equivalents, assessment 
income in 2002-03 should total $345,950. Income derived from handler 
assessments should be adequate to cover budgeted expenses. Funds in the 
reserve (currently $204,350) would be kept within the maximum permitted 
by the order (approximately two fiscal periods' expenses, Sec.  
959.43).
    A review of historical information and preliminary information 
pertaining to the upcoming fiscal period indicates that the grower 
price for the 2002-03 fiscal period could range between $8.60 and $9.25 
per 50-pound equivalent of onions. Therefore, the estimated assessment 
revenue for the 2002-03 fiscal period as a percentage of total grower 
revenue could be about 1 percent.
    This action increases the assessment obligation imposed on 
handlers. While assessments impose some additional costs on handlers, 
the costs are minimal and uniform on all handlers. Some of the 
additional costs may be passed on to producers. However, these costs 
are offset by the benefits derived by the operation of the marketing 
order. In addition, the Committee's meetings were widely publicized 
throughout the South Texas onion industry and all interested persons 
were invited to attend the meetings and participate in Committee 
deliberations on all issues. Like all Committee meetings, the October 
8, 2002, and January 6, 2003, meetings were public meetings and all 
entities, both large and small, were able to express views on this 
issue.
    This rule imposes no additional reporting or recordkeeping 
requirements on either small or large South Texas onion handlers. As 
with all Federal marketing order programs, reports and forms are 
periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this rule.
    A proposed rule concerning this action was published in the Federal 
Register on December 26, 2002 (67 FR 78751). Copies of the proposal 
were also mailed to all onion handlers on December 26, 2002, by the 
Committee staff. Finally, the proposed rule was made available through 
the Internet by the Office of the Federal Register and USDA. A 30-day 
comment period ending January 27, 2003, was provided for interested 
persons to respond to the proposal. Eight comments were received during 
the comment period; six were in support of the assessment rate increase 
as published, and two comments opposed the proposed assessment rate 
increase.
    One commenter in support of the increased assessment rate noted 
that the Committee, recognizing tight economic conditions in recent 
years, reduced the assessment rate two years ago and budgeted a deficit 
by setting an artificially low assessment rate. This commenter, as well 
as another commenter, believes the Committee allowed its reserves to 
get too low, and both fully support the assessment rate increase. The 
commenter also noted that the projected volume of onions would be low 
due to decreased plantings. Both commenters state that in spite of the 
Committee making further cuts in the original budget, decreased 
production dictates that the assessment rate be increased.
    Another comment in support of the increased assessment rate noted 
that, without the increase the Committee would not be able to meet its 
research and marketing program obligations the industry has always 
funded. Two other favorable comments expressed the need for continuing 
to promote Texas onions in order to be able to compete with other 
onion-producing areas.
    One comment, representing a grower and shipper in District 2 
(Laredo-Winter Garden) of the South Texas onion order production area, 
stated that over half of District 2's season is not covered by the 
order. The commenter opposes the increased assessment rate because he 
believes that the Rio Grande Valley growers and shippers gain more from 
the Committee's research and marketing program activities. While it is 
true that the regulatory period, which the Committee approved, ends 
June 4 each year and only includes part of District 2's season, 
District 2 handlers do not pay assessments during the latter part of 
their onion season. District 2 growers and shippers continue to receive 
the benefit of the assessment because all Texas onions grown in the 
production area covered by the marketing order are promoted. 
Consequently, USDA

[[Page 15338]]

disagrees with the commenter's statement that Rio Grande Valley growers 
and shippers would gain more from the increased assessment than those 
from the Laredo-Winter Garden area.
    The second commenter opposing the increase expressed concern 
regarding a possible conflict of interest with some producers and 
handlers on the Committee who also produce and handle onions not 
assessed under the South Texas marketing order. The commenter stated 
that increasing the assessment rate should be determined by those who 
are directly affected, not handlers that either attain most of their 
onion business outside the jurisdiction of the order, or pass on the 
assessment to growers under the jurisdiction of the order. The 
commenter was concerned that such Committee members could unduly shape 
the decision-making of the Committee, that their decisions could be 
biased against their South Texas competitors, and that being on the 
Committee could enable them to raise the production costs (i.e. 
assessments) of their South Texas competition.
    The Committee, which is composed of six producer and four handler 
members from District 1 (Coastal Bend--Lower Valley) and four producer 
and three handler members from District 2, is representative of the 
entire production area. The Committee is established and selected in 
accordance with the provisions of the order. The producer and handler 
members and alternates on the Committee are nominated by their peers 
and are eligible to serve based on their qualifications. The fact that 
some of the Committee members also grow and handle onions outside the 
South Texas onion production area does not disqualify them from serving 
on the Committee. Further, only South Texas onions grown in the 35-
county production area may be assessed for marketing order purposes.
    Based on the foregoing, no changes are being made to the rule as it 
was proposed.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance 
guide should be sent to Jay Guerber at the previously mentioned address 
in the FOR FURTHER INFORMATION CONTACT section.
    After consideration of all relevant material presented, including 
the information and recommendation submitted by the Committee, the 
comments received, and other available information, it is hereby found 
that this rule, as hereinafter set forth, will tend to effectuate the 
declared policy of the Act.
    Pursuant to 5 U.S.C. 553, it also 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 because the 2002-03 
fiscal period began August 1, 2002, and the marketing order requires 
that the rate of assessment for each fiscal period apply to all 
assessable onions handled during such fiscal period. In addition, the 
Committee needs to have sufficient funds to pay its expenses, which are 
incurred on a continuous basis. Further, handlers are aware of this 
action which was recommended by the Committee at a public meeting. 
Also, a 30-day comment period was provided for in the proposed rule and 
all of the comments received have been considered.

List of Subjects in 7 CFR Part 959

    Marketing agreements, Onions, Reporting and recordkeeping 
requirements.

0
For the reasons set forth in the preamble, 7 CFR part 959 is amended as 
follows:

PART 959--ONIONS GROWN IN SOUTH TEXAS

0
1. The authority citation for 7 CFR part 959 continues to read as 
follows:

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


0
2. Section 959.237 is revised to read as follows:


Sec.  959.237  Assessment rate.

    On and after August 1, 2002, an assessment rate of $0.085 per 50-
pound equivalent is established for South Texas onions.

    Dated: March 24, 2003.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-7633 Filed 3-26-03; 1:47 pm]
BILLING CODE 3410-02-P