[Federal Register Volume 68, Number 151 (Wednesday, August 6, 2003)]
[Proposed Rules]
[Pages 46505-46509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19968]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1124 and 1131

[Docket No. AO-368-A32, AO-271-A37; DA-03-04]


Milk in the Pacific Northwest and Arizona-Las Vegas Marketing 
Areas; Notice of Hearing on Proposed Amendments to Tentative Marketing 
Agreements and Orders

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             7 CFR part                  Marketing area        AO Nos.
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1124...............................  Pacific Northwest....    AO-368-A32
1131...............................  Arizona-Las Vegas....    AO-271-A37
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AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule; Notice of public hearing on proposed rulemaking.

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SUMMARY: A public hearing is being held to consider proposals to amend 
the producer-handler provisions of the Arizona-Las Vegas and Pacific 
Northwest orders. The proposals seek to, among other things, end the 
regulatory exemption of producer-handlers from the pooling and pricing 
provisions of these two milk marketing orders if their Class I route 
distribution exceeds three million pounds of milk per month. 
Additionally, the hearing will consider a proposal that would prohibit 
the ability to simultaneously pool the same milk on the Arizona-Las 
Vegas order and on a State-operated milk order that provides for 
marketwide pooling.

DATES: The hearing will convene at 8:30 a.m. on Tuesday, September 23, 
2003.

ADDRESSES: The hearing will be held at the Sheraton Airport Hotel, 1600 
South 52nd Street, Tempe, AZ 85281, telephone: (480) 967-6600.

FOR FURTHER INFORMATION CONTACT: Jack Rower, Marketing Specialist, 
Order Formulation and Enforcement Branch, USDA/AMS/Dairy Programs, STOP 
0231-Room 2971, 1400 Independence Avenue, Washington, DC 20250-0231, 
(202)-720-2357, e-mail address [email protected].
    Persons requiring a sign language interpreter or other special 
accommodations should contact

[[Page 46506]]

William Wise at (602)541-2909 or [email protected] before the hearing 
begins.

SUPPLEMENTARY INFORMATION: This administrative action is governed by 
the provisions of sections 556 and 557 of Title 5 of the United States 
Code and, therefore, is excluded from the requirements of Executive 
Order 12866.
    Notice is hereby given of a public hearing to be held at the 
Sheraton Airport Hotel, 1600 South 52nd Street, Tempe, AZ 85281, 
telephone: (480) 967-6600, beginning at 8:30 a.m., on Tuesday, 
September 23, 2003, with respect to proposed amendments to the 
tentative marketing agreements and to the orders regulating the 
handling of milk in the Arizona-Las Vegas and Pacific Northwest 
marketing areas.
    The hearing is called pursuant to the provisions of the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), and the applicable rules of practice and procedure governing the 
formulation of marketing agreements and marketing orders (7 CFR Part 
900).
    The purpose of the hearing is to receive evidence with respect to 
the economic and marketing conditions which relate to the proposed 
amendments, hereinafter set forth, and any appropriate modifications 
thereof, to the tentative marketing agreements and to the orders.
    Actions under the Federal milk order program are subject to the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). This Act seeks to 
ensure that, within the statutory authority of a program, the 
regulatory and informational requirements are tailored to the size and 
nature of small businesses. For the purpose of the Act, a dairy farm is 
a ``small business'' if it has an annual gross revenue of less than 
$750,000, and a dairy products manufacturer is a ``small business'' if 
it has fewer than 500 employees. Most parties subject to a milk order 
are considered as a small business. Accordingly, interested parties are 
invited to present evidence on the probable regulatory and 
informational impact of the hearing proposals on small businesses. 
Also, parties may suggest modifications of these proposals for the 
purpose of tailoring their applicability to small businesses.
    The amendments to the rules proposed herein have been reviewed 
under Executive Order 12988, Civil Justice Reform. They are not 
intended to have a retroactive effect. If adopted, the proposed 
amendments would not preempt any state or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Agricultural Marketing Agreement Act provides that 
administrative proceedings must be exhausted before parties may file 
suit in court. Under section 8c(15)(A) of the Act, any handler subject 
to an order may request modification or exemption from such order by 
filing with the Department a petition stating that the order, any 
provision of the order, or any obligation imposed in connection with 
the order is not in accordance with the law. A handler is afforded the 
opportunity for a hearing on the petition. After a hearing, the 
Department would rule on the petition. The Act provides that the 
district court of the United States in any district in which the 
handler is an inhabitant, or has its principal place of business, has 
jurisdiction in equity to review the Department's ruling on the 
petition, provided a bill in equity is filed not later than 20 days 
after the date of the entry of the ruling.
    This public hearing is being conducted to collect evidence for the 
record concerning the definition, terms and conditions that are used to 
establish and regulate producer-handlers in the Arizona-Las Vegas and 
Pacific Northwest orders and how producer milk is defined in the 
Arizona-Las Vegas order. The hearing is intended to focus on matters 
related to these issues only. Witnesses are asked to limit their 
testimony to information pertaining directly to the definition of 
producer-handlers in the Arizona-Las Vegas and Pacific Northwest 
orders, the ability to simultaneously pool the same milk on the 
Arizona-Las Vegas order and on a State-operated order that provides for 
marketwide pooling, and closely related issues.
    Interested parties who wish to introduce exhibits also should 
provide the Presiding Officer at the hearing with four (4) copies of 
such exhibits for the Official Record, it would be helpful if 
additional copies are available for the use of other participants at 
the hearing.

List of Subjects in 7 CFR Parts 1124 and 1131

    Milk marketing orders.
    The authority citation for 7 CFR parts 1124 and 1131 continues to 
read as follows:

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

    The proposed amendments, as set forth below, have not received the 
approval of the Department of Agriculture.

PART 1124--[AMENDED]

Proposed by Northwest Dairy Association: Proposal No. 1

    Revise the Producer-handler provision of the Pacific Northwest milk 
marketing order in its entirety to read as follows:


Sec.  1124.10  Producer-handler.

    Producer-handler means a person who operates a dairy farm and a 
distributing plant from which there is route distribution within the 
marketing area during the month not to exceed 3 million pounds and who 
the market administrator has designated a producer-handler after 
determining that all of the requirements of this section have been met.
    (a) Requirements for designation. Designation of any person as a 
producer-handler by the market administrator shall be contingent upon 
meeting the conditions set forth in paragraphs (a)(1) through (5) of 
this section. Following the cancellation of a previous producer-handler 
designation, a person seeking to have their producer-handler 
designation reinstated must demonstrate that these conditions have been 
met for the preceding month.
    (1) The care and management of the dairy animals and the other 
resources and facilities designated in paragraph (b)(1) of this section 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) are under the 
complete and exclusive control, ownership and management of the 
producer-handler and are operated as the producer-handler's own 
enterprise and its own risk.
    (2) The plant operation designated in paragraph (b)(2) of this 
section at which the producer-handler processes and packages, and from 
which it distributes, its own milk production is under the complete and 
exclusive control, ownership and management of the producer-handler and 
is operated as the producer-handler's own enterprise and at its sole 
risk.
    (3) The plant operation designated in paragraph (b)(2) of this 
section at which the producer-handler processes and packages, and from 
which it distributes at or through any of its designated milk handling, 
processing, or distributing resources and facilities other source milk 
products for reconstitution into fluid milk products or fluid milk 
derived from any source other than:
    (i) Its designated milk production resources and facilities (own 
farm production);
    (ii) Pool handlers and plants regulated under any Federal order 
within the

[[Page 46507]]

limitation specified in paragraph (c)(2) of this section; or
    (iii) Nonfat milk solids which are used to fortify fluid milk 
products.
    (4) The producer-handler is neither directly nor indirectly 
associated with the business control or management of, nor has a 
financial interest in, another handler's operation; nor is any other 
handler so associated with the producer-handler's operation.
    (5) No milk produced by the herd(s) or on the farm(s) that supply 
milk to the producer-handler's plant operation is:
    (i) Subject to inclusion and participation in a marketwide 
equalization pool under a milk classification and pricing program under 
the authority of a State government maintaining marketwide pooling of 
returns, or
    (ii) Marketed in any part as Class I milk to the non-pool 
distributing plant of any other handler.
    (b) Designation of resources and facilities. Designation of a 
person as a producer-handler shall include the determination of what 
shall constitute milk production, handling, processing, and 
distribution resources and facilities, all of which shall be considered 
an integrated operation, under the sole and exclusive ownership of the 
producer-handler.
    (1) Milk production resources and facilities shall include all 
resources and facilities (milking herd(s), buildings housing such 
herd(s), and the land on which such buildings are located) used for the 
production of milk which are solely owned, operated, and which the 
producer-handler has designated as a source of milk supply for the 
producer-handler's plant operation. However, for purposes of this 
paragraph, any such milk production resources and facilities which do 
not constitute an actual or potential source of milk supply for the 
producer-handler's operation shall not be considered a part of the 
producer-handler's milk production resources and facilities.
    (2) Milk handling, processing, and distribution resources and 
facilities shall include all resources and facilities (including store 
outlets) used for handling, processing, and distributing fluid milk 
products which are solely owned by, and directly operated or controlled 
by the producer-handler or in which the producer-handler in any way has 
an interest, including any contractual arrangement, or over which the 
producer-handler directly or indirectly exercises any degree of 
management control.
    (3) All designations shall remain in effect until canceled pursuant 
to paragraph (c) of this section.
    (c) Cancellation. The designation as a producer-handler shall be 
canceled upon determination by the market administrator that any of the 
requirements of paragraph (a)(1) through (5) of this section are not 
continuing to be met, or under any of the conditions described in 
paragraphs (c)(1), (2) or (3) of this section. Cancellation of a 
producer-handler's status pursuant to this paragraph shall be effective 
on the first day of the month following the month in which the 
requirements were not met or the conditions for cancellation occurred.
    (1) Milk from the milk production resources and facilities of the 
producer-handler, designated in paragraph (b)(1) of this section, is 
delivered in the name of another person as producer milk to another 
handler.
    (2) The producer-handler handles fluid milk products derived from 
sources other than the milk production facilities and resources 
designated in paragraph (b)(1) of this section, except that it may 
receive at its plant, or acquire for route disposition, fluid milk 
products from fully regulated plants and handlers under any Federal 
order if such receipts do not exceed 150,000 pounds monthly. This 
limitation shall not apply if the producer-handler's own-farm 
production is less than 150,000 pounds during the month.
    (3) Milk from the milk production resources and facilities of the 
producer-handler is subject to inclusion and participation in a 
marketwide equalization pool under a milk classification and pricing 
plan operating under the authority of a State government.
    (d) Public announcement. The market administrator shall publically 
announce:
    (1) The name, plant location(s), and farm location(s) of persons 
designated as producer-handlers;
    (2) The names of those persons whose designations have been 
cancelled; and
    (3) The effective dates of producer-handler status or loss of 
producer-handler status for each. Such announcements shall be 
controlling with respect to the accounting at plants of other handlers 
for fluid milk products received from any producer-handler.
    (e) Burden of establishing and maintaining producer-handler status. 
The burden rests upon the handler who is designated as a producer-
handler to establish through records required pursuant to Sec.  1000.27 
that the requirements set forth in paragraph (a) of this section have 
been and are continuing to be met, and that the conditions set forth in 
paragraph (c) of this section for cancellation of the designation do 
not exist.

Proposed by Dairy Farmers of America: Proposal No. 2

    Proposal 2 is identical to Proposal 1 except that it would also 
limit a producer-handler from distributing fluid milk products to a 
wholesale customer who is served by a fully regulated or partially 
regulated distributing plant that already supplies the same product in 
the same-sized package with a similar label to a wholesale customer 
during the month.

PART 1131--[AMENDED]

Proposed by United Dairymen of Arizona, Northwest Dairy, and Dairy 
Farmers of America: Proposal No. 3

    Amend the Producer-handler definition of the Arizona-Las Vegas milk 
marketing order by revising Sec.  1131.10 to read as follows:


Sec.  1131.10  Producer-handler.

    Producer-handler means a person who operates a dairy farm and a 
distributing plant from which there is route distribution within the 
marketing area during the month not to exceed 3 million pounds and who 
the market administrator has designated a producer-handler after 
determining that all of the requirements of this section have been met.
    (a) Requirements for designation. Designation of any person as a 
producer-handler by the market administrator shall be contingent upon 
meeting the conditions set forth in paragraphs (a)(1) through (5) of 
this section. Following the cancellation of a previous producer-handler 
designation, a person seeking to have their producer-handler 
designation reinstated must demonstrate that these conditions have been 
met for the preceding month.
    (1) The care and management of the dairy animals and the other 
resources and facilities designated in paragraph (b)(1) of this section 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) are under the 
complete and exclusive control, ownership and management of the 
producer-handler and are operated as the producer-handler's own 
enterprise and its own risk.
    (2) The plant operation designated in paragraph (b)(2) of this 
section at which the producer-handler processes and packages, and from 
which it distributes, its own milk production is under the complete and 
exclusive control, ownership and management of the producer-handler and 
is operated as the

[[Page 46508]]

producer-handler's own enterprise and at its sole risk.
    (3) The plant operation designated in paragraph (b)(2) of this 
section at which the producer-handler processes and packages, and from 
which it distributes at or through any of its designated milk handling, 
processing, or distributing resources and facilities other source milk 
products for reconstitution into fluid milk products or fluid milk 
derived from any source other than:
    (i) Its designated milk production resources and facilities (own 
farm production);
    (ii) Pool handlers and plants regulated under any Federal order 
within the limitation specified in paragraph (c)(2) of this section; or
    (iii) Nonfat milk solids which are used to fortify fluid milk 
products.
    (4) The producer-handler is neither directly nor indirectly 
associated with the business control or management of, nor has a 
financial interest in, another handler's operation; nor is any other 
handler so associated with the producer-handler's operation.
    (5) No milk produced by the herd(s) or on the farm(s) that supply 
milk to the producer-handler's plant operation is:
    (i) Subject to inclusion and participation in a marketwide 
equalization pool under a milk classification and pricing program under 
the authority of a State government maintaining marketwide pooling of 
returns, or
    (ii) Marketed in any part as Class I milk to the non-pool 
distributing plant of any other handler.
    (6) The producer-handler does not distribute fluid milk products to 
a wholesale customer who is served by a plant described in Sec.  
1131.7(a), (b), or (e), or a handler described in Sec.  1000.8(c) that 
supplied the same product in the same-sized package with a similar 
label to a wholesale customer during the month.
    (b) Designation of resources and facilities. Designation of a 
person as a producer-handler shall include the determination of what 
shall constitute milk production, handling, processing, and 
distribution resources and facilities, all of which shall be considered 
an integrated operation, under the sole and exclusive ownership of the 
producer-handler.
    (1) Milk production resources and facilities shall include all 
resources and facilities (milking herd(s), buildings housing such 
herd(s), and the land on which such buildings are located) used for the 
production of milk which are solely owned, operated, and which the 
producer-handler has designated as a source of milk supply for the 
producer-handler's plant operation. However, for purposes of this 
paragraph, any such milk production resources and facilities which do 
not constitute an actual or potential source of milk supply for the 
producer-handler's operation shall not be considered a part of the 
producer-handler's milk production resources and facilities.
    (2) Milk handling, processing, and distribution resources and 
facilities shall include all resources and facilities (including store 
outlets) used for handling, processing, and distributing fluid milk 
products which are solely owned by, and directly operated or controlled 
by the producer-handler or in which the producer-handler in any way has 
an interest, including any contractual arrangement, or over which the 
producer-handler directly or indirectly exercises any degree of 
management control.
    (3) All designations shall remain in effect until canceled pursuant 
to paragraph (c) of this section.
    (c) Cancellation. The designation as a producer-handler shall be 
canceled upon determination by the market administrator that any of the 
requirements of paragraph (a)(1) through (5) of this section are not 
continuing to be met, or under any of the conditions described in 
paragraphs (c)(1), (2) or (3) of this section. Cancellation of a 
producer-handler's status pursuant to this paragraph shall be effective 
on the first day of the month following the month in which the 
requirements were not met or the conditions for cancellation occurred.
    (1) Milk from the milk production resources and facilities of the 
producer-handler, designated in paragraph (b)(1) of this section, is 
delivered in the name of another person as producer milk to another 
handler.
    (2) The producer-handler handles fluid milk products derived from 
sources other than the milk production facilities and resources 
designated in paragraph (b)(1) of this section, except that it may 
receive at its plant, or acquire for route disposition, fluid milk 
products from fully regulated plants and handlers under any Federal 
order if such receipts do not exceed 150,000 pounds monthly. This 
limitation shall not apply if the producer-handler's own-farm 
production is less than 150,000 pounds during the month.
    (3) Milk from the milk production resources and facilities of the 
producer-handler is subject to inclusion and participation in a 
marketwide equalization pool under a milk classification and pricing 
plan operating under the authority of a State government.
    (d) Public announcement. The market administrator shall publically 
announce:
    (1) The name, plant location(s), and farm location(s) of persons 
designated as producer-handlers;
    (2) The names of those persons whose designations have been 
cancelled; and
    (3) The effective dates of producer-handler status or loss of 
producer-handler status for each. Such announcements shall be 
controlling with respect to the accounting at plants of other handlers 
for fluid milk products received from any producer-handler.
    (e) Burden of establishing and maintaining producer-handler status. 
The burden rests upon the handler who is designated as a producer-
handler to establish through records required pursuant to Sec.  1000.27 
that the requirements set forth in paragraph (a) of this section have 
been and are continuing to be met, and that the conditions set forth in 
paragraph (c) of this section for cancellation of the designation do 
not exist.


Sec.  1131.13  [Amended]

Proposed by United Dairymen of Arizona: Proposal No. 4

    Revise the producer milk definition of the Arizona-Las Vegas milk 
marketing order so that the same milk cannot be simultaneously pooled 
on the Arizona-Las Vegas order and on a State-operated order that 
provides for marketwide pooling:


Sec.  1131.13  Producer milk.

    1. Section 1131.13 is revised by adding a paragraph (e) to read as 
follows:
    (d) * * *
    (e) Producer milk shall not include milk of a producer that is 
subject to inclusion and participation in a marketwide equalization 
pool under a milk classification and pricing plan under the authority 
of a State government.

Proposed by Dairy Programs, Agricultural Marketing Service: Proposal 
No. 5

    Make such changes as may be necessary to make the entire marketing 
agreements and the orders conform with any amendments thereto that may 
result from this hearing.
    Copies of this notice of hearing and the orders may be procured 
from the Market Administrator of each of the aforesaid marketing areas, 
or from the Hearing Clerk, Room 1083, South Building, United States 
Department of Agriculture, Washington, DC 20250, or may be inspected 
there.

[[Page 46509]]

    Copies of the transcript of testimony taken at the hearing will not 
be available for distribution through the Hearing Clerk's Office. If 
you wish to purchase a copy, arrangements may be made with the reporter 
at the hearing.
    From the time that a hearing notice is issued and until the 
issuance of a final decision in a proceeding, Department employees 
involved in the decision-making process are prohibited from discussing 
the merits of the hearing issues on an ex parte basis with any person 
having an interest in the proceeding. For this particular proceeding, 
the prohibition applies to employees in the following organizational 
units:
    Office of the Secretary of Agriculture,
    Office of the Administrator, Agricultural Marketing Service,
    Office of the General Counsel,
    Dairy Programs, Agricultural Marketing Service (Washington office) 
and the Offices of all Market Administrators.
    Procedural matters are not subject to the above prohibition and may 
be discussed at any time.

    Dated: July 31, 2003.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-19968 Filed 8-5-03; 8:45 am]
BILLING CODE 3410-02-P