[Federal Register Volume 68, Number 154 (Monday, August 11, 2003)]
[Rules and Regulations]
[Pages 47802-47829]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-20374]



[[Page 47801]]

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Part IV





Department of Agriculture





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Grain Inspection, Packers and Stockyards Administration



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9 CFR Part 206



Swine Packer Marketing Contracts; Contract Library; Final Rule

  Federal Register / Vol. 68, No. 154 / Monday, August 11, 2003 / Rules 
and Regulations  

[[Page 47802]]


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DEPARTMENT OF AGRICULTURE

Grain Inspection, Packers and Stockyards Administration

9 CFR Part 206

[PSA-2000-01-b]
RIN 0580-AA71


Swine Packer Marketing Contracts; Contract Library

AGENCY: Grain Inspection, Packers and Stockyards Administration, USDA.

ACTION: Final rule.

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SUMMARY: We are establishing regulations to implement a swine contract 
library as required by the Swine Packer Marketing Contracts subtitle of 
the Livestock Mandatory Reporting Act of 1999. The regulations specify 
how we will establish a library or catalog of contract types that 
packers use to purchase swine for slaughter and make information about 
the contract terms available to the public. The regulations also 
establish monthly reports on the estimated number of swine committed 
for delivery to packers under existing contracts.

DATES: Effective Date: September 10, 2003.
    Compliance Dates:
    1. Each packer's initial submission of example contracts 
representing existing and available contracts is due November 3, 2003.
    2. Each packer's initial submission of monthly reports is due 
December 15, 2003.

FOR FURTHER INFORMATION CONTACT: Dr. Stuart Frank, Supervisory 
Economist, USDA GIPSA, (515) 323-2579, Suite 317, 210 Walnut Street, 
Des Moines, IA 50309, or via e-mail at 
[email protected].

SUPPLEMENTARY INFORMATION:

Congressional Mandate

    Congress passed the Livestock Mandatory Reporting Act of 1999 \1\ 
(LMRA), which includes requirements for mandatory price reporting by 
packers and requirements for reporting of certain information on the 
contract types used by packers for procurement of swine for slaughter. 
The LMRA also amended the Packers and Stockyards Act, as amended and 
supplemented (7 U.S.C. 181-229) (P&S Act) to require the Secretary to 
establish and maintain a library or catalog of the contract types made 
available by certain packers to swine producers. The LMRA requires 
certain packers (specified below) to submit contracts to create the 
contract library. The amendment also requires the Secretary to make 
information concerning those contract types available to producers and 
other interested parties. Additionally, the Secretary is to obtain and 
report monthly information from certain packers concerning the 
estimated numbers of swine to be delivered under contractual 
arrangements for slaughter within the 6- and 12-month periods following 
each monthly report.
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    \1\ Title IX of the Agriculture, Rural Development, Food and 
Drug Administration and Related Agencies Appropriation Act of 2000 
(Pub. L. 106-78).
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    The LMRA also includes a section on the expiration of the authority 
granted by its provisions. Section 942 of the LMRA states that:

    The authority provided by this title and the amendments made by 
this title terminate 5 years after the date of the enactment of this 
Act.

The President signed the appropriations act for Agriculture and other 
agencies on October 22, 1999. Therefore, the LMRA and the related 
amendments to the P&S Act will expire on October 22, 2004.
    This rule sets forth the Grain Inspection, Packers and Stockyards 
Administration (GIPSA) regulations to implement section 934 of the 
LMRA, which amended the P&S Act to require the Secretary to establish 
and maintain a library or catalog of the types of contracts offered by 
certain packers to swine producers. We are implementing the new 
sections of the P&S Act in regulations as new Part 206 of Title 9 of 
the Code of Federal Regulations (the regulations, 9 CFR 206). The 
regulations are described below.
    This regulatory program is intended to meet the purposes of 
providing to producers, packers, and other market participants 
information that can be readily understood with respect to swine 
marketing contracts. By providing this information, the swine contract 
library reports are intended to provide more transparency about 
contract terms and equalize access to market information for all market 
participants.

Background

    On September 5, 2000, we published a proposed rule \2\ in the 
Federal Register (65 FR 53653-53679) to implement the swine contract 
library amendments to the P&S Act. In broad terms, the proposed 
regulatory program can be summarized as follows. The proposed rule 
contained three new regulatory sections that would appear in the Code 
of Federal Regulations at Part 206 of Title 9. The proposed first 
section, section 206.1, contained the definition of terms that would 
apply to the regulations. The definitions were, in the main, taken from 
the definitions in the LMRA. Proposed section 206.2, the contract 
library section of the regulations, required packers to file a copy of 
an example of each swine packer marketing contract currently in effect 
or available and an example of each new contract when it is offered. We 
proposed to publish a summary of contract terms from the example 
contracts that are available in each of five regions of the country and 
by contract type. Proposed section 206.3, the monthly report section, 
required packers to provide an estimate, by month, for the following 12 
months, of the number of committed swine by the type of contract, as 
well as an estimate of the number of swine that could potentially be 
delivered if all existing expansion clauses in contracts are exercised. 
The information from the packer's monthly reports would be aggregated 
and reported by GIPSA on a regional basis. In the proposed rule, we 
indicated that both the summary of contract terms and the aggregated 
monthly report would be available on the Internet on the GIPSA Web site 
or at the GIPSA Regional Office in Des Moines, Iowa.
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    \2\ Refer to the proposal for a detailed explanation of (1) the 
requirements of the LMRA for the implementation of the swine 
contract library and (2) our interpretation of the requirements.
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    We received 11 comments during the 30-day comment period that ended 
on October 5, 2000. Along with reviewing the comments submitted, we 
reviewed the proposal to determine if changes should be made to make 
the final rule more clear and the reporting process more efficient. We 
will describe those changes and address the comments below.

Definition of ``Packer''

    While developing the swine contract library regulations, we 
identified 11 small packers that purchase a small number of swine and 
have them slaughtered at plants that are large enough to make these 
small packers fit the definition of ``packer'' as contained in the 
proposed rule. As reported to us on packer annual reports, in 2000, 
these 11 packers had a combined total of 164,516 hogs slaughtered for 
them by other packers, with the individual amounts from each of the 11 
packers ranging from 181 to 69,262 hogs. Most of these packers purchase 
hogs from the spot market and do not use contracts to purchase hogs for 
slaughter. These 11 packers are not comparable in size to

[[Page 47803]]

the 33 packers \3\ that we estimate would be required to report under 
the swine contract library. We do not anticipate that requiring small 
packers, such as these 11 packers, to report would add enough value to 
the information we report from the swine contract library to justify 
the anticipated burden on such small packers. We determined that it 
would be reasonable to exempt such small packers from the requirements 
of the swine contract library regulations. We revised the definition of 
packers in section 206.1 to apply to a packer purchasing at least 
100,000 swine per year. We used 100,000 as the minimum for consistency 
with the legislative requirement for the average number of hogs that 
each plant slaughters. In comparing the purchases of these 11 small 
packers, in 2000, the maximum annual purchase was 69,262 hogs; as this 
packer increases its annual slaughter to 100,000, it will be required 
to report as required by the swine contract library regulations. Other 
changes to the definition included deleting the phrase ``or firm'' from 
the definition of packer, because the definition of person in the P&S 
Act includes individuals, partnerships, corporations, and associations 
making the use of the phrase ``or firm'' unnecessary, and deleting the 
word ``would'' from the definition of packer.
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    \3\ Based on the 5 year average using the most recent data, 
which included 2002 slaughter data for federally inspected plants 
compiled by the National Agricultural Statistics Service, there are 
33 packers that will be submitting contracts for 53 plants.

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                Text of the regulation as proposed                       Text of the regulation as revised
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Packer. Any person or firm engaged in the business of buying       Packer. Any person engaged in the business of
 swine in commerce for purposes of slaughter, of manufacturing or   buying swine in commerce for purposes of
 preparing meats or meat food products from swine for sale or       slaughter, of manufacturing or preparing
 shipment in commerce, or of marketing meats or meat food           meats or meat food products from swine for
 products from swine in an unmanufactured form acting as a          sale or shipment in commerce, or of
 wholesale broker, dealer, or distributor in commerce. The          marketing meats or meat food products from
 regulations in this part would only apply to a packer              swine in an unmanufactured form acting as a
 slaughtering swine at a federally inspected swine processing       wholesale broker, dealer, or distributor in
 plant that meets either of the following conditions: * * *         commerce. The regulations in this part only
                                                                    apply to a packer purchasing at least
                                                                    100,000 swine per year and slaughtering
                                                                    swine at a federally inspected swine
                                                                    processing plant that meets either of the
                                                                    following conditions: * * *
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Submission of Example Contracts

    During the development of the swine contract library regulations, 
we identified the packers and the specific plants that currently meet 
the requirements of the regulations. The proposed rule did not specify 
how we will provide information about the swine contract library to 
those packers; when this rule is published, we will notify each of 
those packers, in writing, about the information that each packer will 
be required to provide, and provide a packer identification number, 
which we will assign. In addition to providing a copy of guidelines, 
forms, and instructions, the notification will provide information 
about the option of submitting information electronically.
    Each of these packers will be required to submit example contracts 
for each plant at which it slaughters or has hogs slaughtered that 
meets the definition in this rule. Each packer will use the criteria 
established in this rule to determine which existing and available 
contracts can be represented by one example contract. The packer will 
submit as many example contracts as are necessary to represent all of 
its existing and available contracts at the time the initial submission 
is due.
    As a new option, we developed guidelines that the packer may follow 
to submit example contracts and developed an option for the electronic 
submission of example contracts. The guidelines include an optional 
cover sheet for the identification of example contract submissions. The 
guidelines are intended to eliminate the confusion expressed by 
commenters about what needs to be submitted.
    In the proposed rule, we proposed to have each packer sort its 
contracts into six contract type categories, identify the example 
contracts within each contract type category, and then submit the 
example contracts. Since the publication of the proposed rule, we 
realized that each packer could identify its example contracts without 
having to sort the contracts into the six contract type categories. We 
further realized that there would be greater consistency in the 
contracts placed into each category if we identified into which 
contract type category each example contract will be placed, which will 
relieve packers of the additional burden of sorting its contracts into 
the six categories. Therefore, packers do not need to sort contracts by 
category.
    After we receive the example contracts, we will categorize the 
example contracts, using the six contract type categories established 
in this rule. We will notify the packer of the contract type category 
for each example contract submitted. The packer will need to know the 
contract type category to which each example contract is assigned to 
prepare the information required for the monthly reports. We will 
provide the packer with this information at least 2 weeks prior to the 
required submission of monthly reports. In the monthly reports that 
each packer will submit, the packer will report the estimated 
deliveries of hogs for all contracts; in the report, the packer will 
group the estimates by the contract type categories. We will use the 
contract type categories to summarize information from the example 
contracts and the monthly reports and to provide public reports. The 
public reports will be provided by contract type and geographic region. 
Information will only be released to the public if confidentiality 
requirements can be met.
    In addition to the initial submission of existing and available 
contracts, as contracts are made available, revised, or expire, each 
packer should use the following guidelines to determine when another 
submission or notification of a change is required.
    [sbull] Required submission of contract made available: When a 
contract that represents an example contract is made available to swine 
sellers, the packer will submit it to GIPSA as an example contract (for 
discussion purposes, we will call this Example contract A).
    [sbull] Potential subsequent submission due to contract changes: 
When a contract changes, for example, the contract is made available 
and negotiations result in a new example contract, the packer will 
submit the new example contract to GIPSA and specify if it replaces the 
previously submitted example contract or if it is an additional new 
example contract (for discussion purposes, we will call this Example 
contract B). Example contracts would not be continuously submitted to 
GIPSA during negotiations; one would be submitted when it is made 
available to sellers and, when necessary, another

[[Page 47804]]

would be submitted when the negotiation resulted in a contract or when 
an existing contract changes.

    --New additional example contract example: If the packer and the 
producer agree to a contract with a change, which results in a 
different example contract (Example contract B) and the packer 
continues to make Example contract A available to other producers, the 
negotiated contract will be submitted as a new example contract 
(Example contract B).
    --Replacement example: If, however, in that scenario, the packer no 
longer makes the original Example contract A available to any other 
producer and Example contract A is no longer used, then the negotiated 
contract would be submitted as an example contract to replace the 
previously submitted Example contract A.

    [sbull] Notification of example contracts that have expired or that 
have been withdrawn: When a previously submitted example contract no 
longer represents any existing contracts, the packer will notify us 
that the example contract has expired. When a previously submitted 
example contract did not result in any contracts between the packer and 
seller(s) and no longer represents any available contracts, the packer 
will notify us that the example contract was withdrawn.
    The requirements for submitting example contracts and subsequent 
notifications apply to both written and verbal contracts. The packer 
will provide written documentation for example contracts that represent 
verbal contracts. The guidelines identify the information that packers 
should document for verbal contracts. As we stated in the proposed rule 
(65 FR 53659):
packers would be required to provide written descriptions of the 
terms of all agreements for the purchase of swine for slaughter for 
which the parties did not execute a document to signify the 
existence of the agreement. The packer would be required to provide 
all terms of a verbal contract to GIPSA including, but not limited 
to, the base price determination, a schedule of any carcass merit 
premium and discount (including the manner of determining lean 
percent or other merits of the carcass that are used to determine 
the amount of the premiums and discounts and how those premiums and 
discounts are applied), noncarcass merit premiums and discounts, the 
application of a ledger or accrual account, and the length of the 
agreement.

Changes to the Monthly Report Submission Form

    In addition to the changes we made to the rule, in developing Form 
P&SP-341, we revised the form from the sample shown in the proposed 
rule. We revised the look and functionality of the form due to the 
technology available to read the incoming forms and place the 
information directly into the database. We made additional changes on 
the form in order to make the form more understandable and to more 
accurately specify the information required to be submitted on the 
form. Images of both the proposed sample and the current version of the 
form are available at http://www.usda.gov/gipsa/rulemaking/current/fed-
reg.htm. The overall look of the form was revised to be a scanable 
form, which means that the form may be filled in and when we receive it 
and scan it into a computer file, a computer program will automatically 
put the information from the completed form into the correct fields in 
the database. Therefore, the one-page sample as shown in the proposed 
rule became a three-page form.
    When the packer logs in to fill in the electronic version of the 
form, several items will automatically be filled in. Except for 
information that will be pre-filled on the electronic version of the 
form, the electronic version of the form is identical to the hard copy 
of the form. In addition to the information shown on the sample, we are 
requesting a Packer ID number, which we will provide to the packer.
    We changed the main title of the form from ``Packer/Plant Report'' 
to ``Monthly Report'' for consistency with the rule. In the instruction 
line, we removed the reference to the regulations and added the monthly 
due date. The sample form requested the ``State where plant is 
located;'' we revised this item to request the city and state in which 
the plant is located because a packer with multiple plants may have 
more than one plant in the same state. The sample form requested a 
phone number; we revised the placement of this item to specify that we 
are requesting the phone number for the contact person. The sample form 
included a certification statement and a space for a signature; the 
option for electronic submission includes the ability to use an 
electronic signature; we will provide the packer with the required 
information.
    We changed the names of two fields as follows: Firm Name became 
Packer Name and Date of Report became Report Month and Year.
    We moved the placement of the field for the Federal Inspection 
Number (the USDA Food Safety Inspection Service assigns this number to 
the plant).
    Because the scanable form is a multi-page form, we added fields for 
the Packer ID and the Federal Inspection Number at the top of pages 2 
and 3 of the form to ensure that each submission stays together and is 
recognized as a complete submission. In addition, we have numbered each 
section and item on the form for easier reference in the instructions 
for completing the form. Specifically, the three pages of the form have 
been labeled as sections 1, 2, and 3. Section 1 requests the 
identification information (labeled as items 1 through 12); Section 2 
requests estimated deliveries (items 13 through 17); and Section 3 
requests estimated maximum deliveries (items 18 through 22). We made 
changes to the labels shown in the table in the sample form to add 
clarity to the information requested. Specifically, we changed the 
labels for each of the tables as follows: we changed ``Number of Head 
of Estimated Deliveries of Swine'' to ``Estimated Number of Swine To Be 
Delivered Under Existing Contracts'' and we changed ``Number of Head of 
Estimated Maximum Deliveries of Swine'' to ``Estimated Maximum Number 
of Swine To Be Delivered Under Existing Contracts.'' We corrected the 
labels in the tables from ``Existing Contract Types'' to ``Contract 
Types.'' We added the explanatory text ``(12 Months Following the 
Report Month)'' to the Month/Year label. On the sample form, the month/
year elements were illustrated with a four-digit year; on the actual 
form, the packer will only need to provide the last two digits of the 
year. On the sample form, the row for Available contracts shows an X 
for one of the contract types to denote the packer had available 
contract(s) of that type; to facilitate the electronic processes, we 
changed this row to provide ``yes'' and ``no'' choices. Similarly, on 
the sample form, the row for Expansion clauses required the packer to 
fill in the number(s) related to the expansion clauses in the existing 
contracts of each contract type; we changed this row to provide boxes 
to mark for expansion clauses 1, 2, and 3.
    Copies of the form and the instructions are available upon request 
and have been included in the information collection package submitted 
to the Office of Management and Budget (OMB) for approval.
    Other changes and corrections have been made to the regulations. 
These changes are summarized later in this document.

[[Page 47805]]

Discussion of Comments

    On September 5, 2000, we published a proposal in the Federal 
Register (65 FR 53653-53679) to implement the swine contract library 
regulations as required by the Swine Packer Marketing Contracts 
subtitle of the LMRA. We solicited comments concerning our proposal for 
30 days ending October 5, 2000. We received 11 comments by that date. 
The comments were from swine producers, swine producer groups, meat 
packers, meat packer groups, and a state Department of Agriculture. 
Seven comments supported the proposal in part. The comments raised some 
questions and concerns about parts of the proposed rule. These 
questions and concerns and our response to those comments, including 
changes we are making to the rule, are discussed below.

Packer Reporting Clarifications

    Comment: The use of the terms ``type of contract'' and ``example 
contract'' needs clarification.
    Response: There was apparent confusion caused by the use of the 
terms ``type of contract'' and ``example contracts'' in the proposed 
rule. The term ``type of contract'' is used, as it is in the 
legislation, to define contract categories. The term ``example 
contract'' is used to identify the contracts that packers will submit 
to GIPSA.
    ``Type of contract'' refers to the categories that will be used 
throughout the swine contract library to group contracts. The term 
``type of contract'' was used and defined in the LMRA; in order to 
eliminate confusion we will use the term ``contract type'' in its place 
in this document and the rule. As defined by the LMRA, the contract 
type categories are identified by the way in which base price is 
determined and by the presence or absence of a ledger account.\4\ The 
categories will be used for aggregating data on contracts and contract 
information in the swine contract library. The six contract type 
categories used in the swine contract library are:
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    \4\ A ledger or accrual account is an account held by the packer 
on behalf of a producer that accrues a running positive or negative 
balance as a result of a pricing determination included in a 
contract that establishes a minimum and/or maximum level of base 
price paid.
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    (1) Swine or pork market formula purchases with a ledger,
    (2) Swine or pork market formula purchases without a ledger,
    (3) Other market formula purchases with a ledger,
    (4) Other market formula purchases without a ledger,
    (5) Other purchase arrangements with a ledger, and
    (6) Other purchase arrangements without a ledger.
    GIPSA will sort packers' contracts into these six categories; the 
use of contracts in different categories will vary by packer. For 
example, one packer's contracts may all fit into one category while 
another packer's contracts may fit into three of the six categories.
    In the proposed rule, ``type of contract'' was defined in section 
206.1. The definition specified the six categories. For clarity, we 
changed the term ``type of contract'' to ``contract type'' throughout 
the rule. These changes appear in paragraphs 206.2(f), 206.3(c)(2), 
(3), (5), 206.3(g)(ii), (iii), and (v). In addition, we corrected the 
definition of the term by adding a comma after the word packer in the 
first sentence. Due to additional changes in response to another 
comment, the changes for paragraphs 206.3(c)(2) and (g)(ii) are shown 
following the other comment.

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                Text of the regulation as proposed                       Text of the regulation as revised
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Type of Contract. The classification of contracts or risk          Contract type. The classification of
 management agreements for the purchase of swine committed to a     contracts or risk management agreements for
 packer by the determination of the base price and the presence     the purchase of swine committed to a packer,
 or absence of an accrual account or ledger (as defined in this     by the determination of the base price and
 section). The type of contract categories are: * * *               the presence or absence of an accrual
                                                                    account or ledger (as defined in this
                                                                    section). The contract type categories are:
                                                                    * * *
206.2(f) What information from the swine packer marketing          206.2(f) What information from the swine
 contract library will be made available to the public? GIPSA       contract library will be made available to
 will summarize the information it has received on contract         the public? GIPSA will summarize the
 terms, including, but not limited to, base price determination     information it has received on contract
 and the schedules of premiums or discounts. GIPSA will summarize   terms, including, but not limited to, base
 the information by region and type of contract as defined in       price determination and the schedules of
 Sec.   206.1. Geographic regions will be defined in such a         premiums or discounts. GIPSA will make the
 manner as to avoid divulging data on individual firms'             information available by region and contract
 operations and the parties to contracts will not be identified.    type as defined in Sec.   206.1, for public
                                                                    release one month after the initial
                                                                    submission of contracts. Geographic regions
                                                                    will be defined in such a manner to provide
                                                                    as much information as possible while
                                                                    maintaining confidentiality.
206.3(c)(3) Estimates of committed swine. The packer's estimate    206.3(c)(3) Estimates of committed swine.
 of the total number of swine committed under contract for          Each packer must provide an estimate of the
 delivery to each plant for slaughter within each of the            total number of swine committed under
 following 12 calendar months beginning with the 1st of the month   existing contracts for delivery to each
 immediately following the due date of the report. The estimate     plant for slaughter within each of the
 of total swine committed will be reported by type of contract as   following 12 calendar months beginning with
 defined in Sec.   206.1.                                           the 1st of the month immediately following
                                                                    the due date of the report. The estimate of
                                                                    total swine committed will be reported by
                                                                    contract type as defined in Sec.   206.1.
206.3(c)(5) Maximum estimates of swine. The packer's estimate of   206.3(c)(5) Maximum estimates of swine. The
 the maximum total number of swine that potentially could be        packer's estimate of the maximum total
 delivered to each plant within each of the following 12 calendar   number of swine that potentially could be
 months, if any or all the types of expansion provisions            delivered to each plant within each of the
 identified in accordance with the requirement in paragraph         following 12 calendar months, if any or all
 (c)(4) of this section are executed. The estimate of maximum       of the types of expansion clauses identified
 potential deliveries must be reported by type of contract as       in accordance with the requirement in
 defined in Sec.   206.1.                                           paragraph (c)(4) of this section are
                                                                    executed. The estimate of maximum potential
                                                                    deliveries must be reported for all existing
                                                                    contracts by contract type as defined in
                                                                    Sec.   206.1.
206.3(g)(3)(iii) The sum of packers' reported estimates of total   206.3(g)(3)(iii) The sum of packers' reported
 number of swine committed by contract for delivery during the      estimates of the total number of swine
 next 6 and 12 months beginning with the month the report is        committed by contract for delivery during
 published. The report will indicate the number of swine            the next 6 and 12 months beginning with the
 committed by geographic reporting region and by type of            month the report is published. The report
 contract.                                                          will indicate the number of swine committed
                                                                    by geographic reporting region and by
                                                                    contract type.

[[Page 47806]]

 
206.3(g)(3)(v) The sum of packers' reported estimates of the       206.3(g)(3)(v) The sum of packers' reported
 maximum total number of swine that potentially could be            estimates of the maximum total number of
 delivered during each of the next 6 and 12 months if all           swine that potentially could be delivered
 expansion provisions in current contracts are executed. The        during each of the next 6 and 12 months if
 report will indicate the sum of estimated maximum potential        all expansion clauses in current contracts
 deliveries by geographic reporting region and by type of           are executed. The report will indicate the
 contract.                                                          sum of estimated maximum potential
                                                                    deliveries by geographic reporting region
                                                                    and by contract type.
----------------------------------------------------------------------------------------------------------------

    To provide information on the contract types available, GIPSA 
considered the information to be provided and the best way to collect 
that information. GIPSA's interpretation of the requirements is that we 
should make available information about contract terms (for example, 
noncarcass merit premiums) that may affect the calculation of the 
actual price paid to producers. This information is available in the 
contracts and attached documents that complete the contract. GIPSA 
considered requiring each packer to submit all of its contracts, but 
determined that would be unnecessarily burdensome and would not be 
feasible to publish information in a timely manner. Therefore, to 
collect the information, GIPSA proposed to require packers to submit 
example contracts.
    ``Example contracts'' are contracts that a packer submits to GIPSA 
to represent the contracts that the packer has with or makes available 
to producers. The packer must review its contracts and select an 
example contract to represent those contracts that are identical based 
on the following criteria (referred to as the ``four example-contract 
criteria''):
    (1) Base price or determination of base price;
    (2) Application of a ledger or accrual account;
    (3) Carcass merit premium and discount schedules; and
    (4) Use and amount of noncarcass merit premiums and discounts.
    Section 206.2, paragraphs (b) and (c), requires packers to submit 
an example of each contract; paragraph (d) specifies the four criteria 
the packer must use to identify example contracts.
    Comment: What contracts need to be reported?
    Response: Each packer must submit as many example contracts as are 
required to represent all of the contracts that it currently has with 
or makes available to a producer or producers. For the initial 
submission, the packer will submit example contracts that represent all 
of the existing and available contracts. For subsequent submissions, 
the packer will submit example contracts when a change to a previously 
submitted example contract occurs or a new contract is made available 
that results in a new example contract based on the four example-
contract criteria listed above.
    Comment: The use of the terms ``available,'' ``existing,'' and 
``offered'' to describe contracts needs clarification. Specifically, 
the reporting of ``offered'' contracts includes contracts that have 
expired. Packers should submit only available and existing contracts.
    Response: We will require packers to submit example contracts for 
available and existing contracts. The words ``offered,'' ``available,'' 
and ``existing'' were all used in the legislation. In the proposed rule 
we addressed the use of the three terms and explained our 
interpretation of the use of the words. All three of the words were 
used with reference to information to be submitted by packers. As 
stated in the proposed rule, ``Types of contracts offered'' includes 
both ``types of contracts available'' and ``types of existing 
contracts'' (65 FR 53655).
    We eliminated the use of the term ``offered contracts'' and 
replaced it with ``available and existing contracts,'' as appropriate. 
In addition, to further eliminate confusion, we eliminated the use of 
the word ``offer'' as in ``new offers'' and replaced it with the term 
``contracts made available'' as appropriate. The words ``offers,'' 
``offered,'' and ``offering'' were all used in the rule language in the 
proposed rule; to eliminate confusion, we revised the rule language to 
use the words ``available'' and ``existing'' in their place. These 
changes appear in the definition of the term ``noncarcass merit premium 
or discount,'' paragraphs 206.2(c) (title and text), (h), 206.3(c)(1), 
(c)(2), and (g)(3)(ii). (Paragraphs 206.2(c) and (h) were also revised 
in response to another comment; the changes to the proposed text for 
these paragraphs of the regulations are shown below in response to that 
other comment.)

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
Noncarcass merit premium or discount. An increase or decrease in   Noncarcass merit premium or discount. An
 the price for the purchase of swine offered by an individual       increase or decrease in the price for the
 packer or packing plant, based on any factor other than the        purchase of swine made available by an
 characteristics of the carcass, if the actual amount of the        individual packer or packing plant, based on
 premium or discount is known before the purchase and delivery of   any factor other than the characteristics of
 the swine.                                                         the carcass, if the actual amount of the
                                                                    premium or discount is known before the
                                                                    purchase and delivery of the swine.
206.3(c)(1) Existing contracts. The types of contracts the packer  206.3(c)(1) Number of swine to be delivered
 currently is using for the purchase of swine for slaughter at      under existing contracts. Existing contracts
 each plant. Each packer must report types of contracts in use      are contracts the packer currently is using
 even if those types are not currently being offered for renewal    for the purchase of swine for slaughter at
 or to additional producers. Existing contracts will be shown on    each plant. Each packer must provide monthly
 the report by providing monthly estimates of the number of swine   estimates of the number of swine committed
 committed to be delivered under the contracts in each category     to be delivered under all of its existing
 of the types of contracts as defined in Sec.   206.1.              contracts (even if those contracts are not
                                                                    currently available for renewal or to
                                                                    additional producers) in each contract type
                                                                    as defined in Sec.   206.1.
206.3(c)(2) Available contracts. The types of contracts the        206.3(c)(2) Available contracts. Available
 packer is currently offering to producers, or is making            contracts are contracts the packer is
 available for renewal to currently contracted producers, for       currently making available to producers, or
 purchase of swine for slaughter at each plant. On the monthly      is making available for renewal to currently
 report, a packer will indicate each type of contract, as defined   contracted producers, for the purchase of
 in Sec.   206.1, that the packer is currently offering.            swine for slaughter at each plant. On the
                                                                    monthly report, a packer will indicate each
                                                                    contract type, as defined in Sec.   206.1,
                                                                    that the packer is currently making
                                                                    available.

[[Page 47807]]

 
206.3(g)(3)(ii) The types of contracts currently being offered to  206.3(g)(3)(ii) The contract types currently
 additional producers or available for renewal to currently         being made available to additional producers
 contracted producers in each geographic region.                    or available for renewal to currently
                                                                    contracted producers in each geographic
                                                                    region.
----------------------------------------------------------------------------------------------------------------

    Comment: Packers should submit any and all amendments, addenda, or 
specialty clauses that they make available. Submitted contracts should 
be fully representative of those contracts currently in effect.
    Response: The regulation requires packers to submit example 
contracts. We believe that the example contracts should include any and 
all amendments, addenda, and specialty clauses that complete the 
contract. As discussed above, we determined that packers would submit 
example contracts based on a set of criteria. The criteria used to 
identify example contracts focuses on price determining contract terms. 
Using this criteria, the example contracts submitted should provide the 
full range of price determining contract terms for all available and 
existing contracts. The example contracts may not provide all of the 
other provisions (non-price determining contract terms) for all 
available or existing contracts. GIPSA will publish as much information 
as possible on the non-price determining contract terms contained in 
the example contracts while maintaining confidentiality. Therefore, we 
did not make any changes in response to this comment.
    Comment: The requirements for ``reporting concurrently'' and 
``real-time reporting'' need clarification. How would this apply, 
especially during contract negotiations? Contracts and proposed changes 
to contracts should not have to be reported until negotiations are 
final. Publish information within one week of the contract first being 
made available, issuing either a new contract or a change in a contract 
rather than on the actual day. Examples of contract development 
include: a final contract developed through a series of discussions 
with producers and groups of producers; contract made available and 
accepted the same day or the next day; and contracts renegotiated 2 
weeks later and again a week later.
    Response: After a packer's initial submission of example contracts 
for the swine contract library, the packer must provide example 
contracts when a contract is made available that results in a different 
example contract as determined by using the four example-contract 
criteria. The LMRA requires the Secretary to make the information 
available ``on a real-time basis if practicable.'' In the proposed 
rule, we used the word ``concurrently'' for the timing of this 
reporting and proposed to require the packer to provide example 
contracts to GIPSA on the day the contract is made available. The 
examples provided in the comments caused us to reconsider the same-day 
submission requirement.
    We believe that the intention of requiring the library to include 
available contracts and requiring the Secretary make information 
available on a real time basis, if practicable, was to provide 
producers with information about contracts in a timely manner to enable 
the producers to know what terms are available. If packers submit 
contracts only after final negotiations and do not submit the original 
contract, then this purpose is defeated. We understand that contract 
negotiations may result in a contract the same day the contract is made 
available to producers, which would make submitting the contract, as an 
example contract, difficult to do on the same day it is made available. 
We also believe that waiting a week for the submission of the 
information would not provide adequate notice of the contracts to 
producers.
    The steps involved in collecting and processing the information are 
time consuming. One of our goals is to minimize the amount of time 
required to get the information out to the producers. To minimize the 
length of time it takes us to process the information and provide the 
reports, we have automated as much of the process as possible.
    Even with the automation of our process, we need to receive the 
example contracts from the packers in a timely fashion, in order for us 
to meet the requirement of ``real time'' reporting as closely as we 
can. Therefore, the packer must submit example contracts to us within 
one business day of making the contract available or revising the 
contract, when the available contract or the change results in a new or 
replacement example contract. In addition, packers will also be 
required to notify us of expired contracts or withdrawn contracts by 
the next business day, to enable us to remove the information from the 
contract summary reports and keep the information up to date and 
representative of available and existing contracts. Therefore, we 
changed the submission requirements specified in paragraph (c) and 
paragraph (h) of section 206.2 of the regulations to require the packer 
to submit available contracts within one business day of making the 
contract available or of a contract change, expiration, or withdrawal.
    Other changes to paragraph 206.2(h) included changing ``on the day 
that one of its example contracts no longer represents any existing or 
offered contracts'' to ``when an example contract no longer represents 
any existing or available contract (expired or withdrawn),'' adding a 
sentence to the end of the paragraph to specify that the example 
contracts and notifications must be submitted within one business day, 
and combining the first and second sentences of the paragraph and 
correcting the sentence by changing the word ``that'' to ``if'' in the 
phrase ``if the new example contract.''

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.2(c) What offered contracts do I need to provide and when are  206.2(c) What available contracts do I need
 they due? After the initial submission, each packer must send      to provide and when are they due? After the
 GIPSA an example of each new contract it offers to a producer or   initial submission, each packer must send
 producers on the day the contract is offered at each plant that    GIPSA an example of each new contract it
 it operates or at which it has swine slaughtered that meets the    makes available to a producer or producers
 definition of packer in Sec.   206.1.                              within one business day of the contract
                                                                    being made available at each plant that it
                                                                    operates or at which it has swine
                                                                    slaughtered that meets the definition of
                                                                    packer in Sec.   206.1.

[[Page 47808]]

 
206.2(h) What do I need to do when a previously submitted example  206.2(h) What do I need to do when a
 contract is no longer a valid example due to contract changes,     previously submitted example contract is no
 expiration, or withdrawal? Packers must submit a new example       longer a valid example due to contract
 contract when contract changes result in changes to the criteria   changes, expiration, or withdrawal? Each
 specified in paragraph (d) of this section. Packers must notify    packer must submit a new example contract
 GIPSA that the new example contract replaces the previously        when contract changes result in changes to
 submitted example contract. Packers must notify GIPSA on the day   any of the four example-contract criteria
 that one of its example contracts no longer represents any         specified in paragraph (d) of this section
 existing or offered contracts. This notification must specify      and notify GIPSA if the new example contract
 the reason, for example, changes to a contract, expiration of an   replaces the previously submitted example
 existing contract, or withdrawal of an offered contract.           contract. Each packer must notify GIPSA when
                                                                    an example contract no longer represents any
                                                                    existing or available contract (expired or
                                                                    withdrawn). Each packer must submit these
                                                                    example contracts and notifications within
                                                                    one business day of the change, expiration,
                                                                    or withdrawal.
----------------------------------------------------------------------------------------------------------------

    Comment: For new available contracts, negotiated contracts, and 
revised contracts, under which circumstances does a packer need to send 
the contract to GIPSA as an example contract and when is the example 
contract due? For contract changes, what is required for compliance? 
Are packers to report modifications to existing contracts as new 
contracts? This is especially important for verbal contracts because 
they tend to be modified several times even after initial agreement is 
reached.
    Response: The packer must submit an example contract when a new 
available contract, negotiated contract, or revised contract is not the 
same as any previously submitted example contracts, as determined by 
any difference in the four example-contract criteria. The example 
contract must be submitted within one business day of a negotiated 
contract, a contract change, or a contract being made available.
    After a contract is made available to a producer and reported to 
GIPSA as an example contract, there may be changes made through 
negotiations. When the negotiations are complete and the packer has an 
accepted contract, the packer will determine if the contract is 
represented by the same example contract as the available contract, if 
it is represented by another previously submitted example contract, or 
if it constitutes a new example contract that must be submitted. If the 
negotiated contract is represented by a previously submitted example 
contract that has not expired or been withdrawn, then the packer does 
not need to submit an example contract for the negotiated contract. If 
the negotiated contract is not represented by a previously submitted 
example contract, then the packer needs to submit the negotiated 
contract as an example contract. The submission will be a new or 
replacement example contract based on whether or not the previously 
submitted example contract is still a valid example contract for any 
available or existing contracts. The packer will report the example 
contract as required by section 206.2 paragraph (h).
    The following chart is designed to help a packer decide if a new 
available contract, negotiated contract, or revised contract needs to 
be submitted as an example contract relative to previously submitted 
example contracts, even those that have expired or been withdrawn. 
Specific examples, from the comments, follow the chart.
BILLING CODE 3410-EN-P

[[Page 47809]]

[GRAPHIC] [TIFF OMITTED] TR11AU03.039

BILLING CODE 3410-EN-C
    In addition, we developed guidelines that are intended to provide 
clarity to packers for the submission of example contracts. When this 
final rule is published, we will send a package to each packer required 
to submit information when the rule is effective; the package will 
include a copy of the guidelines. Copies of the guidelines are 
available through the swine contract library Web site and from the Des 
Moines Regional Office upon request, and have been included in the 
information collection package submitted to OMB for approval.
    Comment: When should a verbal agreement be reported?
    Response: The requirement for reporting a verbal contract is the 
same as for a written contract. A packer must

[[Page 47810]]

report a verbal contract to GIPSA within one business day of the 
contract's availability or change when the available contract or change 
results in an example contract as determined by the four example-
contract criteria.
    Comment: If a packer makes a verbal contract available to a 
producer on Monday, is that available contract reported to GIPSA the 
same day? Similarly, if negotiations result in an accepted contract on 
the same day, do the original available contract and subsequent 
modification both have to be reported?
    Response: If both the available contract and the accepted contract 
occur on Monday and if the original available contract is still 
available to other producers, then the packer evaluates the 
differences, based on the four example-contract criteria, to determine 
if the available contract and the accepted contract are represented by 
one or two example contracts and if either of those example contracts 
have been submitted to GIPSA previously and are still included in the 
swine contract library as example contract(s) for available or existing 
contracts.
    [sbull] If there are two example contracts, and if those two 
example contracts were not represented by a previously submitted 
example contract, then the packer reports both the available contract 
and the accepted contract as example contracts; the example contracts 
would be due on Tuesday (the next business day).
    [sbull] If there is one example contract, and if the example 
contract was not a previously submitted example contract, the packer 
would report the example contract; it would be due on Tuesday (the next 
business day).
    [sbull] If the original available contract was not available to any 
other producers, then only the example contract for the accepted 
contract, which occurred on the same day as the contract was made 
available, would be reported; it would be due on Tuesday (the next 
business day).
    Comment: Would the reporting requirement be different if the 
modification occurred on the Tuesday following the original contract 
availability on Monday?
    Response: If the original contract was made available on Monday and 
the contract is accepted on Tuesday, the reporting requirement may be 
different.
    [sbull] If the contract made available on Monday is an example 
contract, based on the four example-contract criteria, then that 
example contract is due on Tuesday (the next business day after it was 
made available) (for discussion purpose, we will call this Example 
contract X).
    [sbull] If the contract made available on Monday were accepted on 
Tuesday, the packer would determine if, based on the four example-
contract criteria, the accepted contract should be represented by a 
different example contract (for discussion purpose, we will call this 
Example contract Y). If Example contract Y had not been submitted 
previously, the packer would report Example contract Y; it would be due 
on Wednesday (the next business day after it was accepted).

--When the packer submits Example contract Y, if Example contract X is 
still available to other producers, then the packer will have submitted 
two example contracts (Example contract X on Tuesday and Example 
contract Y on Wednesday).
--When the packer submits Example contract Y, if Example contract X was 
not available to any other producers (the available contract was 
withdrawn), then Example contract Y, for the accepted contract, would 
be due on Wednesday and would be submitted as a replacement example 
contract to replace Example contract X submitted on Tuesday. In this 
scenario, if the packer wanted to submit only one example contract, the 
packer could choose to submit Example contract Y earlier than required, 
by submitting it on Tuesday. Then only Example contract Y would be 
submitted instead of submitting Example contract X on Tuesday and 
replacing it with Example contract Y on Wednesday.
    Comment: If a verbal agreement on a 5-year window contract is 
renegotiated two weeks later to extend to 7 years and renegotiated the 
following week regarding a ``sort loss'' provision, are these three 
reportable events?
    Response: No, this example would not result in three reportable 
events; however, it may be two reportable events. If the verbal 
agreement on a 5-year window contract was not represented by a 
previously submitted example contract, then it would be submitted as an 
example contract (reportable event). The length of contract is a 
reportable term of the verbal contract, but it is not one of the four 
example-contract criteria that are used to identify example contracts. 
Renegotiating the length of the contract from 5 years to 7 years does 
not change any of the four example-contract criteria. Therefore, in the 
example, the result of the first renegotiation would not be a second 
reportable event. Renegotiating the ``sort loss'' provision would be a 
change to one of the four example-contract criteria, the carcass merit 
premium and discount schedules, therefore, if there was not any other 
previously submitted example contract that is the same based on the 
four example-contract criteria, then the renegotiated contract would be 
reported either (1) as a new example contract if the original verbal 
agreement was still a valid example contract (available to or existing 
for another producer) or (2) as a replacement example contract to 
replace the previously submitted example contract.
    Comment: If the verbal agreement is put in writing several days 
afterward, does that constitute a different or unique reportable event?
    Response: If the verbal agreement is put in writing several days 
afterward, it would not constitute a different or unique reportable 
event. That is, assuming the written version and the previously 
submitted example contract that represents the verbal contract are the 
same with regard to the four example-contract criteria. The reportable 
event would be the original available contract and the accepted 
contract, if either is not represented by a previously submitted 
example contract.

Packer Reporting Clarifications

    Comment: How should futures-based contracts be reported?
    Response: Packers must report futures-based contracts in the same 
manner as all other contracts, by identifying example contracts based 
on the four example-contract criteria and submitting the example 
contracts to us. For the summarized reports we make available, as 
specified in the definition of ``other market formula purchases,'' we 
will report futures-based contracts as ``other market formula 
purchases.''
    In the proposed rule, the packer was responsible for the 
classification of contracts into categories as part of the packer's 
preparation for submitting example contracts. To eliminate confusion 
about how to categorize contracts and to ensure uniformity of the 
application of categories, we eliminated the requirement that packers 
categorize contracts, which was specified in the preamble of the 
proposed rule. Instead, GIPSA will categorize the contract into the 
``contract type'' category. This change will reduce the burden on 
packers. We will notify the packer of the categories for the example 
contracts in writing, by phone, or by another method as

[[Page 47811]]

needed.\5\ The timing and method of notification will vary, in part, 
depending on how many example contracts we receive that need to be 
categorized and how long that takes. We will provide each packer with 
notification of the categories for each example contract at least 2 
weeks before the monthly reports are due.
---------------------------------------------------------------------------

    \5\ The regulation will require a total of 33 pork packing 
companies (packers) to report for 53 plants that have the 
slaughtering capacity specified in the definition of ``packer'' in 
section 206.1, based on data including 2002, the most recent year 
for which complete data are available.
---------------------------------------------------------------------------

    Comment: Do packers need to report ledger balances for the swine 
contract library?
    Response: No. Contracts with ledgers or accrual accounts will 
specify the way ledgers or accrual accounts are applied in the 
contract, for example, the conditions of the ledger and formulas or 
methods for crediting or debiting ledger accounts. Therefore, we did 
not make any changes in response to this comment.

Reported Contract Information

    Comment: Only publish information for available and existing 
contracts; do not publish information about contracts that are no 
longer available or existing. What contract information will GIPSA 
publish?
    Response: We will publish information on available and existing 
contracts. Within the library that GIPSA is required to maintain, 
previously available contracts will be maintained, but will not be 
included in the publicly reported information after the packer notifies 
GIPSA that the contract is no longer available or has expired.
    GIPSA will remove the previously submitted example contract 
information from the publicly reported information when a packer 
submits a replacement example contract, or notifies GIPSA that a 
contract has expired or a contract has been withdrawn. Therefore, we 
did not make any changes in response to this comment.
    Comment: Release redacted contracts.
    Response: The amendment to the P&S Act that creates the swine 
contract library requires the Secretary to make information concerning 
contract types, not the contracts themselves, available to producers 
and other interested parties. We considered the alternative of 
redacting the identity of persons (including parties to the contract) 
and any proprietary business information from the contracts and 
releasing the redacted contracts. Publishing redacted contracts could 
inadvertently allow the identity of a packer to be determined. For 
example, it may not be clear that information on the device used to 
estimate lean percent would need to be redacted, but if only one packer 
is using a specific device to estimate lean percent, then the packer 
could be identified from the contract. If contracts were redacted to a 
level of detail to ensure that confidentiality is preserved, then very 
little information would be released. Therefore, we did not make any 
changes in response to this comment.
    Comment: Change the format of the information GIPSA reports by 
linking the reported contract terms to the base price.
    Response: In designing the contract summary reports, one of our 
concerns was how to provide as much information as possible and comply 
with the confidentiality provision in the P&S Act. We concluded that if 
we linked the terms from a contract together with the base price 
information, it would be possible to identify an individual packer 
based on the combination of that information. Therefore, we did not 
make any changes in response to this comment.
    Comment: All carcass and noncarcass merit premiums and discounts, 
not just those on a grid, should be reported by the packer and by 
GIPSA. For example, contract terms that were categorized as ``other 
contract terms'' in the proposed rule, such as length of contract, 
genetics, type of feed, and medication are specified in contracts as 
requirements and therefore should be treated as premiums. Contract 
requirements, other than pricing terms identified in the proposed rule 
should be reported; for example, genetic requirements to qualify for a 
contract. Some carcass merit requirements are specifications that are 
not included on a grid; these specifications should be included in the 
contract library. Packers should have to report all terms of agreement 
for a contract so producers can analyze the information and make a 
marketing decision.
    Response: As specified in the definition of ``noncarcass merit 
premium or discount'' in the regulation, a premium is an increase in 
the price for the purchase of swine offered by a packer based on a 
factor other than a carcass characteristic if the actual amount of the 
premium is known before the purchase and delivery of the swine. If a 
packer includes an increase in price for any contract term other than a 
term that specifies a carcass characteristic, it will be treated as a 
premium.
    It appears that there was some confusion about what we will publish 
in the swine contract library. The sample report shown in the proposed 
rule was a one-page sample highlighting the types of information that 
we proposed to publish. As we stated in the preamble of the proposed 
rule (65 FR 53664):

    The example contracts would provide the contract library with 
unique base price determinations, the application of ledgers or 
accrual accounts, carcass merit premium and discount schedules, and 
the use and amount of noncarcass merit premiums. Other contract 
terms that could be reported include a variety of terms that could 
affect producer's marketing decisions, such as quality and weight 
restrictions, length of contract, and use of packer specified 
genetics. These other contract terms would not be included in the 
criteria used to identify example contracts. Therefore, the 
information contained in the contract library on such other contract 
terms may not represent the full range of alternatives that packers 
are offering or have offered. We propose to summarize information on 
contract terms from the example contracts contained in the contract 
library to provide as much information about contract terms as 
possible, subject to the confidentiality protections.

    It is our intention to publish as much information from the 
contract terms as possible. In addition to the price information, the 
sample showed categories for Quality and Weight Restrictions and Other 
General Contract Terms. Due to the large volume of information that 
will be published and for ease of access to the information on the Web 
site, we changed the format in the following manner:
    [sbull] In the proposed rule, the sample report showed the base 
price determination as a combination of five to six pieces of 
information (65 FR 53663). This was intended to show a variety of the 
pieces of information that are used to determine the base price for a 
contract. Generally, the base price is calculated based on a reported 
price. To simplify the presentation of the base price determination 
information, on the Web site, base price determination will be 
presented as a list showing combinations of four key pieces of 
information, which will identify the reported price used. The remaining 
details used to determine each of the base prices will be provided 
under the unique combinations of those four key pieces of information. 
The four key pieces of information are:

    --Name: The title or reference to a published or private report 
(for example, the Agricultural Marketing Service (AMS) Western Cornbelt 
Lean Hog, plant price, AMS Omaha Corn, or CME lean hog).
    --Version: Typically, named reports will have more than one 
version; for reports released more than once a day, the version is the 
release time

[[Page 47812]]

of the named report (for example, open, close, mid-session, or 10 
a.m.).
    --Time period: Daily and weekly reports are available and more than 
one report may be used to calculate the base price. The time period 
specifies the day(s) or week(s) of the version of the report, that will 
be used to calculate base price (for example, Day prior to delivery, 
previous week average, or 20 week average).
    --Series: On the version of the report, the series will identify 
the specific number, dollar value, from the report (for example, 
weighted average, top, or mid-point).

    [sbull] The sample report in the proposed rule showed two tables 
for premium and discount schedules, which showed aggregate ranges for 
the premiums and discounts based on range of lean percent and carcass 
weight. The premium and discount schedules will be presented in a 
consistent manner and will show actual adjustments.
    [sbull] The sample report showed one noncarcass merit premium. 
Noncarcass merit premiums and discounts will be grouped into categories 
to show the various amounts for the same noncarcass premium and 
discount category.
    [sbull] The sample report showed generalized statements concerning 
how a ledger account would be handled. Provisions in the application of 
ledger section will be grouped into four subcategories: Window/Target 
Price, Window Conditions, Limits on Ledgers, and Termination of Ledger.
    [sbull] The sample report showed two items each for two categories 
for other provisions of contracts. Other provisions of contracts will 
include all other provisions, grouped into categories to show similar 
contract terms together.
    The ``other provisions'' section of the contract summary report 
will include contract terms from all example contracts for each 
contract type within a region related to quality and weight, purchase 
conditions and payment, volume and delivery, business practices, and 
general contract terms. This will be an aggregation from all example 
contracts in the region and, to ensure confidentiality, will not be 
linked to other contract terms from example contracts. The ``quality 
and weight'' section will include information from contract terms 
specifying drug usage/withdrawal, genetics, nutrition, carcass 
evaluation programs, changes in evaluation, quality improvement 
programs, lean percentage or yield requirements, target weights and 
weights used for payment, off quality hogs, and meat quality or 
usability. The ``purchase conditions and payment'' section will include 
information from contract terms specifying calculation of payment, 
changes in payment calculation, transmittal of payment, penalties for 
failure to meet standards, and other payment conditions. The ``volume 
and delivery'' section will include information from contract terms 
specifying scheduling and delivery conditions, volume requirements, and 
right of first refusal. The ``business practices'' section will include 
information from contract terms specifying facilities, records and 
financial soundness requirements, transfer of title, and other business 
conditions. The ``general contract terms'' section will include 
information from contract terms specifying assignment of agreement, 
confidentiality, dispute resolution, enforcement, force majeure, 
indemnity, notice requirements, term of the agreement, termination of 
the agreement, review and renewal of the agreement, and other general 
contract terms.
    Packers will submit example contracts to GIPSA. The four example-
contract criteria used to identify example contracts focuses on price 
determining contract terms. Therefore, submitted example contracts will 
provide the full range of price determining contract terms for all 
available and existing contracts. The example contracts may not provide 
all of the other provisions (non-price determining contract terms) for 
all available or existing contracts. GIPSA will publish as much 
information on the non-price determining contract terms as possible 
while maintaining confidentiality. Therefore, we did not make any 
changes in the rule in response to this comment, however the contract 
summary report has been changed as previously described.
    Comment: Use uniform measurements and terms for published contract 
information, such as the range of percent lean, base price, and carcass 
weight. Report the base price on a carcass weight basis on a consistent 
weight basis or have the weight clearly labeled on the report. Reports 
must foster easy comparison.
    Response: To the extent that the packers use uniform measurements 
and terms, we will report uniform measurements and terms. We will 
receive example contracts from packers and publish a summary of 
contract terms based on those example contracts. Different packers use 
different measurements and terms, which will be reported in the 
contract summaries.
    The information from the swine contract library will provide 
producers with information from available and existing contracts. We 
will publish as much information from the contract terms as possible, 
so producers can see the variety of terms that packers are making 
available or using. We agree with the commenter that the information 
must be presented in a way that will foster easy comparison; given the 
quantity of information and the limitations of the confidentiality 
protections, we have designed the summary reports to foster easy 
comparison by grouping like information together into relevant 
categories of contract terms. We believe that the greatest value in the 
information from contract terms will be gained by providing producers 
the ability to see contract terms in as close to the original content 
and language as possible. In that way, producers will better understand 
the contract terms that are actually available. To prepare reports that 
would attempt to convert the contract terms to uniform measures would 
require conversion factors that were constantly updated and if we 
waited to assure the use of correct conversion factors, we could not 
present the information in real-time. Additionally, we could 
inadvertently change the content or lose information. Therefore, we did 
not make any changes in response to this comment.
    Comment: Producers are unlikely to identify the contract provisions 
of interest and approach packers within the region to negotiate a 
contract. Producers looking for a contract with a packer generally have 
to take one of the contracts currently available. They may look for 
different available contracts, but individual producers generally don't 
have the bargaining power to get packers to incorporate beneficial 
provisions into a newly drafted contract. For the reported contract 
information to be beneficial it must provide as complete a picture of 
each contract available as possible.
    Response: Amendments to the P&S Act require us to implement a swine 
contract library and make information available. In addition, it 
requires us to protect the confidentiality of the information. To meet 
those requirements, we are providing as much information as possible 
while maintaining confidentiality. We believe that there are additional 
benefits to the availability of the information, which we discussed in 
estimating the benefits for the implementation for this rule.

[[Page 47813]]

    The purpose of the swine contract library is to provide producers, 
packers, and other market participants with information that can be 
readily understood with respect to swine marketing contracts. By 
providing this information, the swine contract library reports are 
intended to provide more transparency about contract terms and equalize 
access to market information for all market participants.
    Because of the lack of information in the past, producers have not 
had access to enough information to identify the variety of contract 
terms being made available by packers. The publicly available 
information from the contracts will provide producers with 
significantly more information than they had in the past about the 
variety of contract terms. Producers will be able to see the full range 
of contract terms being made available by the packers in a region, 
whereas in the past they might only have known about the terms a packer 
made available to them. With more information they will be better 
equipped to negotiate contracts. Therefore, we did not make any changes 
in response to this comment.
    Comment: Require packers to report contracts by the state in which 
they are available or are in force (producer location). Reporting 
information in this way may be more useful to producers than reporting 
by the location of the plant.
    Response: We will require each packer to report contracts by the 
plant location. We understand that some producers may find it useful to 
review information for contracts that are available to producers 
located in their geographic region, or specifically their state. Most 
producers know where plants are located in relationship to the 
production site. If a producer is willing to transport animals a 
significant distance, that producer will be able to obtain information 
from the area to which he is willing to ship. The contract terms and 
prices are likely to be associated to plants. Packers do not tend to 
make contracts available based on producer location, rather, they make 
contracts available based on the plant location. That is, a packer 
specifies contract terms, such as base price determination, based on 
market conditions prevailing at the plant. The packer does not 
distinguish where the animal originated, only where it will be 
slaughtered.
    In planning the swine contract library summary report, we 
considered various ways in which we could present meaningful 
information to producers. Among other things, we considered the 
geographic areas for which we publish information. One of the criteria 
we use to meet the confidentiality requirements is that we will not 
publish information from fewer than three packers in a region. If we 
were to publish information by state, then we would encounter greater 
constraints about information that we publish because there are states 
in which only one or two packers operate. Given the requirements for 
confidentiality, publishing information by multi-state regions allows 
us to publish more information.
    We decided to report the contract information on a regional basis, 
based on the plant locations, to provide as much price information from 
the contracts as possible under the confidentiality protections. This 
method of providing information informs producers and other interested 
persons that one of the packers that have hogs slaughtered at a plant 
in that region has an available or existing contract that contains some 
of the terms published in the summary for that region.
    In addition, we will not receive information from packers to show 
where every contract is available based on producer locations. We 
considered this alternative, but determined that it would add burden to 
the packers without providing additional information. Specifically, it 
would have been time consuming for packers to provide the additional 
information and for us to receive and process the additional 
information. By using plant locations, there is a one-to-one 
relationship between the example contract and the plant location that 
allows us to publish the information from each contract to a single 
region. If, however, producer locations had been used, we would have to 
know each state in which the packer is making the contract available to 
producers, and then publish the contract information for each of those 
states. If we asked the packer to identify producer locations for each 
example contract, and if all producer locations were not immediately 
known to the packer, the packer would need additional time to collect 
and provide that information and then more time would be required for 
us to receive and process the producer locations as the locations 
became known. If we had required packers to submit producer locations 
for all the contracts that the example contract represented, then a 
potential negative result could have been packers limiting the 
availability of contracts to producers in a specific location.
    We considered all of these factors and because changing the report 
summaries to producer locations would not result in the release of 
additional information, we determined that it would not be worth the 
additional burden and costs that would have been required. Therefore, 
we did not make any changes in response to this comment.

Confidentiality

    Comment: There is no reasonable expectation of privacy with regard 
to the information to be available in the library and packers, for the 
most part, have not attempted to keep contracts confidential.
    Response: The amendment to the P&S Act that requires us to 
establish and maintain the swine contract library specifically requires 
us to protect the identity of persons, including parties to contracts 
reported to us by packers and to protect proprietary business 
information from those contracts. Section 222(c) of the P&S Act 
specifies that the reporting requirements of the swine contract library 
are subject to the protections provided under section 251 of the 
Agricultural Marketing Act of 1946 (7 U.S.C. 1636), which was initiated 
by the LMRA. We must comply with the statutory requirement. Therefore, 
we did not make any changes in response to this comment.
    Comment: How will confidentiality be maintained? Do not identify 
any individual packer; do not include the term ``from each packer,'' as 
used in the proposed rule, in the final rule. It is important to 
maintain confidentiality when reporting contract information, including 
proprietary information and the identity of packers and producers.
    Response: To maintain confidentiality, as required by the amendment 
to the P&S Act, we will publish information about the contract terms 
and not the contracts themselves. Among the confidentiality provisions 
is the requirement to ensure that confidentiality is preserved with 
respect to the identity of the parties to the contracts. Therefore, our 
summaries and reports will not identify the parties to the contract 
(packer names or producer names).
    As stated in the proposed rule (65 FR 53669), ``to ensure 
confidentiality, information will only be published if it is obtained 
from no fewer than three packers representing a minimum of three 
companies, and no packer represents a dominant portion of the region's 
total'' for the particular report.
    To ensure that confidentiality is preserved regarding the 
identities of persons, including parties to a contract, and the 
proprietary nature of the information included in the contracts, we 
will present the contract library information without indications about

[[Page 47814]]

how the contract terms relate to each other within an example contract. 
The contract library information will provide a summary of the contract 
terms that are available in each region.
    The use of the term ``from each packer'' in the proposed rule came 
directly from the amendment to the P&S Act. Among other things, new 
section 222(d) of the P&S Act requires the Secretary to provide 
specific information in a monthly report, including information on the 
contracts types available from each packer. The information that we 
will report includes the contracts types available from packers in a 
specific region. Each packer that meets the definition of packer in 
section 206.1 must submit example contracts and volume information to 
GIPSA. However, the published reports will not identify the names of 
packers that submitted contracts to GIPSA. Therefore, we did not make 
any changes in response to this comment.
    Comment: If there are so few packers within a region that 
information cannot be reported due to the confidentiality protections, 
it may be an indication that there may be too great a concentration of 
market share in that region. GIPSA should investigate whether a packer 
is taking actions in the region that violate the P&S Act, specifically, 
actions that have the purpose or effect of creating a monopoly in 
violation of section 202 of the P&S Act.
    Response: We routinely investigate packers for potential violations 
of the P&S Act. If any information received for the swine contract 
library suggests a potential violation of the P&S Act, we will 
investigate to determine if a violation of the P&S Act has occurred or 
is occurring. Therefore, we did not make any changes in response to 
this comment.

Outreach

    Comment: Develop a comprehensive producer education or outreach 
plan to inform producers of the reports, their content, how they can be 
used, and where they can be accessed. Add other avenues of information 
dissemination because some pork producers lack Internet access.
    Response: GIPSA will use a variety of methods to disseminate 
information about the swine contract library, with the intent of making 
every potential customer aware of the swine contract library, its 
capabilities and availability. A press release containing basic 
information about the swine contract library will be issued to national 
and local press markets, to trade and industry groups for publication, 
and to USDA agencies and offices that have contact with producers and 
other interested groups and individuals who might benefit from the 
information in the swine contract library. GIPSA will make use of 
public service announcements distributed through unpaid media, USDA 
agency newsletters for producers and other stakeholders, and radio to 
inform producers that the swine contract library reports are available 
and where to find them. GIPSA will provide information about the swine 
contract library when meeting with trade and industry groups for 
dissemination to members, and directly to individuals in meetings as 
appropriate.
    The swine contract library reports will be available to customers 
and the general public on the Internet, posted on the GIPSA Web site, 
linked to other USDA Web sites, and available in hard copy at GIPSA's 
Packers and Stockyards Programs headquarters in Washington, DC, and at 
the regional office located in Des Moines, Iowa. The swine contract 
library Internet site is compliant with Section 508 of the 
Rehabilitation Act \6\ for those customers using computer software 
requiring adherence to Section 508 standards for alternate use. GIPSA 
will coordinate customer access to the services of the USDA Target 
Center \7\ for those who require alternative formats of the swine 
contract library reports.
---------------------------------------------------------------------------

    \6\ See 29 U.S.C. 749d for section 508 of the Rehabilitation 
Act.
    \7\ The U.S. Department of Agriculture established the 
Technology Accessible Resources Gives Employment Today (TARGET) 
Center, to support the USDA with assistive technology and ergonomic 
solutions. As part of the USDA's commitment to ensure compliance 
with Section 508 requirements that all electronic and information 
technology be accessible to persons with disabilities, the USDA 
TARGET Center is the contact point and resource center for 
converting USDA information and documents into alternative formats. 
Alternative formats include Braille, large print, video description, 
diskette, and audiotape formats.
---------------------------------------------------------------------------

    GIPSA is working with other USDA agencies that have an active 
presence at the local level to address the difficulties that may be 
faced by some producers who would benefit from the information 
contained in the swine contract library, but do not personally have 
immediate access to the Internet. Many communities have libraries with 
Internet access and capabilities that provide such service to 
residents. Producers can use these services for access to the swine 
contract library. In addition, while GIPSA received four comments on 
the proposed rule addressing Internet access to the swine contract 
library, half (two) endorsed this method of information delivery, one 
pointed out the need for an active outreach and communications effort 
supporting this method of information delivery, and only one stated 
that Internet access alone was not sufficient. (For additional 
information, contact GIPSA using the phone number, address, or e-mail 
address listed in the FOR FURTHER INFORMATION CONTACT section of this 
document.) No changes were made to the rule based on these comments.
    Comment: Swine producers need to understand the contract library 
information. Simplify everything possible. Test the reports with pork 
producers.
    Response: We agree with the commenter that producers need to 
understand the information from the swine contract library. Wherever 
possible, we have made adjustments to the presentation of the 
information to simplify it and make it understandable. As the 
information is made public and we hear from producers we will continue 
to make changes where possible to simplify the presentation of the 
information. As stated in the proposed rule, we will ``conduct ongoing 
analyses of the data and information obtained from packers, and would 
explore ways to increase the usefulness of the data and information'' 
(65 FR 53671).
    Throughout the development process, one of the considerations was 
the best way to present the information to make it understandable and 
usable. One of the difficulties is that contracts, and specifically 
individual contract terms, can be difficult to understand. The purpose 
of the swine contract library is to provide information to producers 
and other interested parties about the contract type's terms available 
from packers; it does not replace legal or other business advice for 
understanding contract terms or how the terms apply to an individual 
producer's business.
    Another difficulty was the volume of information we expect to 
receive and summarize to make publicly available. We have simplified 
the summarization, presentation of, and access to the information where 
possible. We will reduce the volume of information by eliminating 
redundancies, where possible; for example, contract terms that show up 
in multiple contracts will be included once in the summary of contract 
terms. To make it easier to get to specific information, we organized 
the reports into sections.
    The contract summary report of contract terms available within a 
region consists of four sections. The ``determination of base price'' 
section includes terms related to how base price is set. The ``premiums 
and discounts'' section includes terms related to

[[Page 47815]]

adjustments to the base price as determined by carcass and noncarcass 
traits. This section includes carcass merit premium and discount 
schedules, grading devices and formulas, and noncarcass merit premiums 
and discounts, specifying the dollar or percentage adjustment (or 
range) of the premium or discount. The ``application of ledger'' 
section includes terms related to the application and use of ledger or 
accrual accounts. This section includes information from contract terms 
specifying window/target price, window conditions, limits on the 
ledger, and termination of ledger. The ``other provisions'' section 
includes terms related to any item other than those listed above, such 
as quality and weight, purchase conditions and payment, volume and 
delivery, business practices, and general contract terms.
    We will group like information and list it with descriptive 
headings. For example, the section that provides the determination of 
base price information will organize the base prices by several key 
pieces of information (Name, Version, Series, Time Period) for example, 
Iowa/Southern Minnesota, Mid-Session, Weighted Average, Day of 
Delivery. Additional details that complete the determination of base 
price will be listed with these key pieces of information. This 
approach will allow users to see the range of base price options.
    When we tested the summary report we involved individuals within 
USDA who have backgrounds in and knowledge of hog marketing, including 
some former hog producers. Where possible, within the confidentiality 
requirements, we made changes based on their suggestions to simplify 
the presentation of the information and make the information more 
accessible and understandable.

Availability of Contracts

    Comment: Must packers make contracts available to every producer?
    Response: No. This regulation requires packers to submit example 
contracts to GIPSA; neither the amendments to the P&S Act that created 
the swine contract library or this regulation implementing it imposes 
requirements for how or to whom a packer makes a contract available. 
Packers must continue to comply with the requirements in the P&S Act 
and related regulations. We did not make any changes in response to 
this comment.

Enforcement

    Comment: Does GIPSA intend to audit the estimates of the number of 
contracted swine that packers must submit in monthly reports?
    Response: Yes, on an ongoing basis, GIPSA will monitor and review 
the accuracy of the estimates of the number of contracted swine that 
packers specify in the submitted monthly reports. In addition, we will 
monitor and review the example contract submissions and the monthly 
reports for completeness, consistency, and accuracy. As specified in 
the proposed rule, packers must maintain records to verify the accuracy 
of the information required to be reported. Therefore, we did not make 
any changes in response to this comment.
    Comment: What will the penalty be for not including carcass or 
noncarcass premiums and discounts in the reported contract?
    Response: The reported example contract must be complete and, 
therefore, must include all carcass and noncarcass premiums and 
discounts associated with the example contract. As specified in new 
section 222(e) of the P&S Act, to willfully fail or refuse to provide 
accurate information constitutes a violation of the P&S Act. Excluding 
carcass or noncarcass premiums or discounts that apply to the contract 
from the reported example contracts would constitute a violation of 
Title II of the P&S Act. Section 203 of the P&S Act sets forth the 
procedures that the Secretary is authorized to follow whenever there is 
reason to believe that any packer has violated or is violating a 
provision of Title II of the P&S Act. Section 203 of the P&S Act also 
specifies the sanction that may be assessed if the Secretary determines 
that a violation has occurred.\8\ Therefore, we did not make any 
changes in response to this comment.
---------------------------------------------------------------------------

    \8\ Any such violation will be subject to an order to cease and 
desist from continuing such violation and a civil penalty of not 
more than $11,000 for each such violation.
---------------------------------------------------------------------------

State Laws

    Comment: Minnesota, Iowa, and several other Corn Belt States have 
forbidden contract clauses requiring contract terms to be kept 
confidential. In addition, Minnesota requires packers to file 
contracts. Will these State laws be preempted?
    Response: No. The state statutory requirement that there be no 
confidentiality clause in contracts will not be preempted, but GIPSA 
will comply with the P&S Act amendment requirement that requires 
confidentiality of certain information from contracts submitted to 
GIPSA for the swine contract library. Implementation of the swine 
contract library will not preempt State or local laws, regulations, or 
policies unless they present an irreconcilable conflict with the 
statute. The state laws mentioned in the comment do not appear to 
present an irreconcilable conflict with the statute or this regulation 
which implements the statute. We did not make any changes in response 
to this comment.

Evaluate Contracts

    Comment: Knowing the provisions of contracts and being able to 
differentiate the value of various contracts and contract terms are two 
different things. Will GIPSA or some other USDA agency provide a test 
or worksheet that a producer can use to evaluate contracts in the 
future?
    Response: The purpose of the swine contract library is to provide 
information to producers and other interested parties about the 
contract types and terms available from packers; it will not provide 
guidance for evaluating contracts. However, through the GIPSA Web site 
on the Internet, we provide links to information that may help 
producers evaluate livestock and poultry contracts. In addition, 
through the AMS Web site on the Internet, AMS provides information on 
contracting in agriculture and making the right decisions about 
contracting. We did not make any changes in response to this comment.

Summary of Changes to the Rule

    As discussed above, in response to comments, we made changes to the 
rule. Also, we made a number of additional changes to improve 
consistency, clarity, and make corrections. All of the changes to the 
rule are summarized below.
    In response to comments, we made the following changes:
    [sbull] We eliminated the use of the words ``offer,'' ``offers,'' 
``offered,'' and ``offering.'' We replaced the use of the word 
``offer'' as in ``new offers'' with ``contracts made available'' or 
``available contracts'' as appropriate. These changes appear in the 
definition of the term ``noncarcass merit premium or discount,'' 
paragraphs 206.2(c) (title and text), (h), 206.3(c)(1), (c)(2), and 
(g)(3)(ii).
    [sbull] We changed the term ``type of contract'' to ``contract 
type.'' These changes appear in the definition of the term and in 
paragraphs 206.2(f), 206.3(c)(2), (3), (5), (g)(iii), and (v). Other 
changes included correcting the definition of ``contract type'' by 
adding a comma after the word packer in the first sentence, in 
paragraph 206.3(g)(3)(iii), and correcting the

[[Page 47816]]

sentence by inserting the word ``the'' in front of the phrase ``total 
number of swine.''
    [sbull] We changed the rule to require that packers submit new 
example contracts and notification of changes to GIPSA within one 
business day after the availability of the contract or the day the 
change was made. These changes appear in paragraphs 206.2(c) and (h). 
We made the following related changes in paragraph 206.2(h): We changed 
``on the day that one of its example contracts no longer represents any 
existing or offered contracts'' to ``when an example contract no longer 
represents any existing or available contract (expired or withdrawn)'' 
and we added a sentence to the end of the paragraph to specify that the 
example contracts and notifications must be submitted within one 
business day. Other changes made to paragraph 206.2(h) included 
combining the first and second sentences of the paragraph and 
correcting the sentence by changing the word ``that'' to ``if'' in the 
phrase ``if the new example contract.''
    We revised the definition of ``packer'' in section 206.1 to apply 
to a packer purchasing at least 100,000 swine per year. Other changes 
to the definition include deleting the phrase ``or firm'' and the word 
``would'' from the definition of ``packer.''
    The proposed rule inconsistently referred to the packers in the 
singular and plural and by personal and impersonal pronouns. We changed 
references to packers throughout to make them consistent as follows: We 
changed plural references to the singular, ``packers'' became ``each 
packer'' and we changed personal pronouns to impersonal pronouns, 
``they'' became ``it.'' Other words in the sentences were revised as 
needed based on these changes. For example, in paragraph 206.3(c), 
``packers file'' was corrected to ``each packer files.'' These changes 
appear in paragraphs 206.2(a), (e), and (h), and paragraphs 206.3(a), 
(b), (c), (e), (f), and (f)(2). A specific example of this change is 
shown in the following table. Another change we made in paragraphs 
206.2(e)(1), (2), (g), 206.3(c), (f)(1), (2), and (g)(1) was correcting 
the regional office address by replacing ``the GIPSA Regional Office at 
Room 317'' with ``USDA GIPSA, Suite 317.''

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.3(f)(2) Printed report. Packers may deliver their printed      206.3(f)(2) Printed report. Each packer may
 monthly report to the GIPSA Regional Office at Room 317, 210       deliver its printed monthly report to USDA
 Walnut Street, Des Moines, IA 50309.                               GIPSA, Suite 317, 210 Walnut Street, Des
                                                                    Moines, IA 50309.
----------------------------------------------------------------------------------------------------------------

    For consistency and clarity, we revised references to the criteria 
used to identify example contracts to read ``the four example-contract 
criteria.'' These changes appear in paragraphs 206.2(d) and (h). A 
specific example of this change is shown in the following table.

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.2(d) What criteria do I use to select example contracts? For   206.2(d) What criteria do I use to select
 purposes of distinguishing among contracts to determine which      example contracts? For purposes of
 contracts may be represented by a single example, contracts will   distinguishing among contracts to determine
 be considered to be the same if they are identical with respect    which contracts may be represented by a
 to all of the following four criteria:                             single example, contracts will be considered
                                                                    to be the same if they are identical with
                                                                    respect to all of the following four example-
                                                                    contract criteria:
----------------------------------------------------------------------------------------------------------------

    Paragraph 206.2(e) was revised to add the option for electronic 
submission of example contracts and notifications. We changed ``must 
send'' to ``may submit'' with specification of two options for 
submission, and we created two subparagraphs to specify the two methods 
for submitting example contracts and notifications. For clarity, we 
changed the title of the paragraph to more correctly describe the 
requirements provided in the paragraph. In addition, we added ``and 
notifications'' after ``submit the example contracts'' and changed 
``required by paragraphs (b) and (c) of this section'' to ``required by 
this section.''

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.2(e) Where do I send my contracts? Packers must send the       206.2(e) Where and how do I send my
 example contracts required in paragraphs (b) and (c) of this       contracts? Each packer may submit the
 section to the GIPSA Regional Office at Room 317, 210 Walnut       example contracts and notifications required
 Street, Des Moines, IA 50309.                                      by this section by either of the following
                                                                    two methods:
                                                                    (1) Electronic report. Example contracts and
                                                                    notifications required by this section may
                                                                    be submitted by electronic means. Electronic
                                                                    submission may be by any form of electronic
                                                                    transmission that has been determined to be
                                                                    acceptable to the Administrator. To obtain
                                                                    current options for acceptable methods to
                                                                    submit example contracts electronically,
                                                                    contact GIPSA through the Internet on the
                                                                    GIPSA Web site (http://www.usda.gov/gipsa/)
                                                                    or at USDA GIPSA, Suite 317, 210 Walnut
                                                                    Street, Des Moines, IA 50309.
                                                                    (2) Printed report. Each packer that chooses
                                                                    to submit printed example contracts and
                                                                    notifications must deliver the printed
                                                                    contracts and notifications to USDA GIPSA,
                                                                    Suite 317, 210 Walnut Street, Des Moines, IA
                                                                    50309.
----------------------------------------------------------------------------------------------------------------

    We changed ``swine packer marketing contract(s)'' references to 
``swine contract library'' everywhere it appeared. The term ``swine 
packer marketing contract'' was used throughout the proposed rule to be 
consistent with the title of the amendments to the P&S Act. These 
regulations implement the swine

[[Page 47817]]

contract library as required by the Swine Packer Marketing Contract 
subtitle of the P&S Act. We believe that ``swine contract library'' is 
more accurate than the phrase ``swine packer marketing contracts.'' The 
information from the contract library will be available publicly, 
however, the contracts will not be released. Therefore, to avoid 
confusion, we changed all of the references. These changes appear in 
the titles of Part 206, section 206.2, and paragraphs 206.2(f) and (g), 
and in the text of paragraph 206.3(a). Examples of this change are 
shown in the following table. Similarly, we changed ``swine packer 
marketing contract information'' to ``swine contract information'' in 
206.2(a). In addition, for consistency, we deleted the words ``swine 
packer marketing contract'' from the title of paragraph 206.3(a).
    We changed the last sentence of paragraph 206.2(g) by deleting the 
phrase ``and/or examples of new contracts'' because the word 
``information'' includes example contracts, and deleting the phrase 
``in Des Moines, Iowa,'' which was immediately followed by the office 
address in the proposed rule and therefore redundant.

----------------------------------------------------------------------------------------------------------------
    Text of the regulation as proposed Part 206--Swine Packer       Text of the regulation as revised Part 206--
                       Marketing Contracts                                     Swine Contract Library
----------------------------------------------------------------------------------------------------------------
206.2 Swine packer marketing contract library.                     206.2 Swine contract library.
206.3(a) Do I need to provide swine packer marketing contract      206.3(a) Do I need to provide monthly
 monthly reports? Packers, as defined in Sec.   206.1, must         reports? Each packer, as defined in Sec.
 provide information for each swine processing plant that they      206.1, must provide information for each
 operate or at which they have swine slaughtered that has the       swine processing plant that it operates or
 slaughtering capacity specified in the definition of packer.       at which it has swine slaughtered that has
                                                                    the slaughtering capacity specified in the
                                                                    definition of packer.
----------------------------------------------------------------------------------------------------------------

    In paragraph 206.2(f), we changed the second sentence to eliminate 
redundancy. Both the first and second sentences, as proposed, began 
``GIPSA will summarize.'' We changed the second sentence to delete the 
phrase and to indicate when the first summary report will be made 
available. In addition, we changed the end of the last sentence from 
``as to avoid divulging data on individuals firms'' operations and the 
parties to contracts will not be identified'' to ``to provide as much 
information as possible while maintaining confidentiality'' to refer to 
confidentiality in a consistent manner in this document. We also made 
this change in paragraph 206.3(g)(2). We changed ``Geographic regions 
will be defined in such a manner as to avoid divulging data on 
individual firms' operations and may be modified from time to time.'' 
to ``Geographic regions will be defined in such a manner to provide as 
much information as possible while maintaining confidentiality and may 
be modified from time to time.''

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.2(f) What information from the swine packer marketing          206.2(f) What information from the swine
 contract library will be made available to the public? GIPSA       contract library will be made available to
 will summarize the information it has received on contract         the public? GIPSA will summarize the
 terms, including, but not limited to, base price determination     information it has received on contract
 and the schedules of premiums or discounts. GIPSA will summarize   terms, including, but not limited to, base
 the information by region and type of contract as defined in       price determination and the schedules of
 Sec.   206.1. Geographic regions will be defined in such a         premiums or discounts. GIPSA will make the
 manner as to avoid divulging data on individual firms'             information available by region and contract
 operations and the parties to contracts will not be identified.    type as defined in Sec.   206.1, for public
                                                                    release one month after the initial
                                                                    submission of contracts. Geographic regions
                                                                    will be defined in such a manner to provide
                                                                    as much information as possible while
                                                                    maintaining confidentiality.
206.3(g)(2) Information in the report will be aggregated and       206.3(g)(2) Information in the report will be
 reported by geographic regions. Geographic regions will be         aggregated and reported by geographic
 defined in such a manner as to avoid divulging data on             regions. Geographic regions will be defined
 individual firms' operations and may be modified from time to      in such a manner to provide as much
 time.                                                              information as possible while maintaining
                                                                    confidentiality and may be modified from
                                                                    time to time.
----------------------------------------------------------------------------------------------------------------

    In paragraph 206.2(b), the requirement is for the packer to send 
the example contracts to GIPSA; it is not a packer's responsibility to 
also ensure that we receive the example contracts. Therefore, we 
revised the sentence to remove the phrase ``and the Grain Inspection, 
Packers and Stockyards Administration (GIPSA) must receive.''
    To add clarity, we changed the title of paragraph 206.3(b). The new 
title more correctly describes the requirements provided in the 
paragraph. Other changes included abbreviating ``Iowa'' to ``IA'' and 
adding the timing for the beginning of the monthly reports.

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.3(b) What information do I need to provide and when is it      206.3(b) When is the monthly report due? Each
 due? Each packer must send a separate monthly report for each      packer must send a separate monthly report
 plant that has the slaughtering capacity specified in the          for each plant that has the slaughtering
 definition of packer in Sec.   206.1. Packers must deliver the     capacity specified in the definition of
 report to the GIPSA Regional Office in Des Moines, Iowa by the     packer in Sec.   206.1. Each packer must
 close of business on the 15th of each month. The GIPSA Regional    deliver the report to the GIPSA Regional
 Office closes at 4:30 p.m. Central Time. If the 15th day of a      Office in Des Moines, IA, by the close of
 month falls on a Saturday, Sunday, or federal holiday, the         business on the 15th of each month,
 monthly report is due no later than the close of the next          beginning at least 45 days after the initial
 business day following the 15th.                                   submission of example contracts. The GIPSA
                                                                    Regional Office closes at 4:30 p.m. Central
                                                                    Time. If the 15th day of a month falls on a
                                                                    Saturday, Sunday, or federal holiday, the
                                                                    monthly report is due no later than the
                                                                    close of the next business day following the
                                                                    15th.
----------------------------------------------------------------------------------------------------------------


[[Page 47818]]

    To correct a reference, in paragraph 206.3(f) we changed ``monthly 
contract information'' to ``monthly report.'' In addition, we added 
``required by this section.''

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
 206.3(f) Where and how do I send my monthly contract              206.3(f) Where and how do I send my monthly
 information? Packers may submit their monthly reports by either    report? Each packer may submit monthly
 of the following two methods:                                      reports required by this section by either
                                                                    of the following two methods:
----------------------------------------------------------------------------------------------------------------

    To add clarity, we changed the title of paragraph 206.3(c). The new 
title more correctly describes the requirements provided in the 
paragraph. Other changes included correcting the form number reference 
in paragraph 206.3(c) and including information on where to obtain the 
form.

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.3(c) How do I make a monthly report? The monthly report that   206.3(c) What information do I need to
 packers file must be reported on PSP Form 341 and must provide     provide in the monthly report? The monthly
 the following information:                                         report that each packer files must be
                                                                    reported on Form P&SP-341, which will be
                                                                    available on the Internet on the GIPSA Web
                                                                    site (http://www.usda.gov/gipsa/) and at
                                                                    USDA GIPSA, Suite 317, 210 Walnut Street,
                                                                    Des Moines, IA 50309. In the monthly report,
                                                                    each packer must provide the following
                                                                    information:
----------------------------------------------------------------------------------------------------------------

    In paragraph 206.3(e), the first sentence clearly states the 
requirement. The second sentence, as proposed, neither added 
requirements nor clarity. Therefore, we determined that the second 
sentence was unnecessary and deleted it to simplify the paragraph.

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.3(e) When do I change previously reported estimates?           206.3(e) When do I change previously reported
 Regardless of any estimates for a given future month that may      estimates? Regardless of any estimates for a
 have been previously reported, current estimates of deliveries     given future month that may have been
 reported as required by paragraphs (c)(3) and (c)(5) of this       previously reported, current estimates of
 section must be based on the most accurate information available   deliveries reported as required by
 at the time each report is prepared. Packers must update or        paragraphs (c)(3) and (c)(5) of this section
 change any previously reported estimates for any month(s)          must be based on the most accurate
 included on the current report to reflect accurate information     information available at the time each
 on producers' plans, initiation of new contracts, or any other     report is prepared.
 circumstances that cause changes in expected future deliveries.
----------------------------------------------------------------------------------------------------------------

    In paragraph 206.3(f)(1), we deleted ``e-mail or any other'' 
because during development of the reporting process we determined that 
we could not offer an e-mail submission option that would be secure and 
guarantee the confidentiality of the files submitted during the 
transmission process. Instead, we developed a secure Web site so that 
we could offer the option of electronic submission.

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.3(f)(1) Electronic report. Information reported under this     206.3(f)(1) Electronic report. Information
 section may be reported by electronic means, to the maximum        reported under this section may be reported
 extent practicable. Electronic submission may be e-mail or by      by electronic means, to the maximum extent
 any other form of electronic transmission that has been            practicable. Electronic submission may be by
 determined to be acceptable to the Administrator. To obtain        any form of electronic transmission that has
 current options for acceptable methods to submit information       been determined to be acceptable to the
 electronically, contact GIPSA through the Internet on the GIPSA    Administrator. To obtain current options for
 homepage (http://www.usda.gov/gipsa/) or at the GIPSA Regional     acceptable methods to submit information
 Office at Room 317, 210 Walnut Street, Des Moines, IA 50309.       electronically, contact GIPSA through the
                                                                    Internet on the GIPSA Web site (http://www.usda.gov/gipsa/) or at USDA GIPSA, Suite
                                                                    317, 210 Walnut Street, Des Moines, IA
                                                                    50309.
----------------------------------------------------------------------------------------------------------------

    We changed the word ``homepage'' to ``Web site'' each time it 
appeared. The information from the swine contract library will be 
available on the GIPSA Web site, however it will not appear directly on 
the GIPSA homepage. Users will initially find a direct link to the 
information on the GIPSA homepage, but in the future, as the GIPSA Web 
site goes through changes and updates, the link may not continue to 
appear on the homepage if there is another logical place for it to 
appear. This change appears in paragraphs 206.2(g) and paragraphs 
206.3(f)(1) and (g)(1). Other changes to paragraph 206.3(g)(1) included 
changing the first sentence to more correctly describe the available 
information by changing ``contract types and estimated deliveries'' to 
``estimated deliveries by contract type.''
    In paragraph 206.3(c)(1), we revised the title to more correctly 
describe the requirements provided in the paragraph. We revised the 
first sentences of paragraphs 206.3(c)(1) and (2) to clarify that they 
provide definitions for existing and available contracts, respectively, 
for which each packer must submit

[[Page 47819]]

estimates on monthly reports.\9\ In addition, we revised the second and 
third sentences to combine text to more directly and correctly state 
the requirement. As proposed, the second sentence could have been 
misleading; the requirement is not to report the types of contracts, 
but rather to report the number of estimated swine to be delivered. The 
revised sentence focuses on the estimates to be reported, it does not 
change the requirement to report those estimates. Other changes 
included in paragraph 206.3(c)(2) included changing the phrase ``for 
purchase'' to ``for the purchase'' and in paragraphs 206.3(c)(1) and 
(c)(2) changing ``the types of contracts'' to ``contracts.''
---------------------------------------------------------------------------

    \9\ The table showing the changes from the proposed rule in 
paragraphs 206.3(c)(1) and (c)(2) is in the Discussion of Comments 
section of this document.
---------------------------------------------------------------------------

    In the proposed rule, we used the terms ``expansion provisions'' 
and ``expansion clauses'' to mean the same thing. In a contract, the 
expansion clause specifies the possibilities for increase of a 
quantity. For consistency, in the title of paragraph 206.3(c)(4) and 
the text of paragraphs 206.3(c)(4), (4)(iii), (5), (g)(3)(iv), and (v), 
we revised ``provisions'' to ``clauses.'' For consistency, in 
paragraphs 206.3(c)(4)(i) and (ii), we revised ``contract terms'' to 
``clauses.'' A specific example of this change in paragraph 2.6.3(c)(4) 
is shown in the following table. Other changes in section 206.3 
included correcting the sentence in paragraph (c)(5) by inserting the 
word ``of'' in front of the phrase ``the types of expansion clauses'' 
and added ``for all existing contracts'' to the second sentence for 
clarity and in paragraph 206.3(g)(3)(iv) changing the word ``ensuing'' 
to ``following'' for consistency and plain language.\10\
---------------------------------------------------------------------------

    \10\ The table showing the changes from the proposed rule in 
paragraphs 206.3(c)(5) is in the Discussion of Comments section of 
this document.

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.3(c)(4) Expansion provisions. Any conditions or circumstances  206.3(c)(4) Expansion clauses. Any conditions
 specified by provisions in any existing contracts that could       or circumstances specified by clauses in any
 result in expansion in the estimates specified in paragraph        existing contracts that could result in an
 (c)(3) of this section. Each packer will identify the expansion    increase in the estimates specified in
 provisions in the monthly report by listing a code for the         paragraph (c)(3) of this section. Each
 following conditions:                                              packer will identify the expansion clauses
                                                                    in the monthly report by listing a code for
                                                                    the following conditions:
    (iii) Contract terms that allow for a range of the number of      (iii) Clauses that allow for a range of
     swine to be delivered;                                            the number of swine to be delivered;
    (iii) Contract terms that require a greater number of swine       (iii) Clauses that require a greater
     to be delivered as the contract continues;                        number of swine to be delivered as the
                                                                       contract continues;
    (iii) Other provisions that provide for expansion in the          (iii) Other clauses that provide for
     numbers of swine to be delivered.                                 expansion in the numbers of swine to be
                                                                       delivered.
----------------------------------------------------------------------------------------------------------------

    To specify that estimates reported in the monthly reports come from 
contracts and not from contract types, in the title of paragraph 
206.3(d), we changed ``type of contract'' to ``contract.'' In addition, 
for clarity with the wording used throughout the regulations, we 
changed the word ``head'' to ``swine.''

----------------------------------------------------------------------------------------------------------------
                Text of the regulation as proposed                       Text of the regulation as revised
----------------------------------------------------------------------------------------------------------------
206.3(d) What if a type of contract does not specify the number    206.3(d) What if a contract does not specify
 of head committed?                                                 the number of swine committed?
----------------------------------------------------------------------------------------------------------------

    In the proposed rule, the authority citation included 7 U.S.C. 198, 
198a, and 198b, which are the sections of the U.S. Code in which the 
sections of the P&S Act that require the establishment of the swine 
contract library are codified. We corrected the authority citation by 
replacing those citations with Section 941 of Public Law 106-78, 113 
Statute 1135, which is the section of the Livestock Mandatory Price 
Reporting Act that requires regulations to implement the swine contract 
library.
    We added the OMB control number at the end of sections 206.2 and 
206.3 to show the OMB approval for the collection of information 
required by the swine contract library regulations, which OMB has 
approved concurrently with the approval of the final rule.

Summary of Swine Contract Library Final Rule

    Who must provide contract information? The regulations apply to a 
packer purchasing at least 100,000 swine per year and slaughtering 
swine at a federally inspected swine processing plant that meets either 
of the following conditions:
    (1) A swine processing plant that slaughtered an average of at 
least 100,000 swine per year during the immediately preceding 5 
calendar years, with the average based on those periods in which the 
plant slaughtered swine; or
    (2) Any swine processing plant that did not slaughter swine during 
the immediately preceding 5 calendar years that has the capacity to 
slaughter at least 100,000 swine per year, based on plant capacity 
information.
    Throughout this document, references to ``packers'' refer to the 
packers that are required to report under the swine contract library 
regulations. Throughout this document, references to ``plants'' refer 
to the plants at which the swine are slaughtered for which the packers 
are required to report. Currently, most of the packers required to 
report slaughter swine at a plant that the packer owns. In a few cases, 
the packer required to report has the swine slaughtered at a plant it 
does not own.
    What contracts will packers need to provide? Each packer must send 
GIPSA example contracts for available and existing contracts with a 
producer (or producers) for the procurement of swine for slaughter. For 
a packer using more than one plant, the packer must submit a separate 
package of example contracts for each plant that has the slaughtering 
capacity specified in the definition of ``packer.''
    For verbal contracts, packers must provide written descriptions of 
the terms of all agreements for the purchase of swine for slaughter for 
which the parties did not execute a document to signify the existence 
of the agreement.
    As specified in section 206.2(a), (b), and (c) of the regulations, 
each packer must file an initial submission of example contracts 
currently in effect or available and subsequent submissions with 
example contracts made available at each plant at which the packer 
slaughters swine.

[[Page 47820]]

    The initial submission of example contracts is due the first 
business day of the month following the determination that the plant 
has the slaughtering capacity specified in the definition of 
``packer.'' GIPSA has made that determination for plants that are 
currently in operation; in the future as new plants open, the 
determination will be made as the information is available. When this 
final rule is published in the Federal Register, GIPSA will notify each 
packer in writing if it is required to submit information, and how and 
when to submit, for the swine contract library. To submit information 
for the swine contract library, example contracts and monthly reports, 
packers may submit hard copies or submit electronically via the swine 
contract library Web site. For new contracts, the packer must send the 
example contract to our Regional Office in Des Moines, within one 
business day of the contract's availability.
    In addition to submitting example contracts, as specified in 
section 206.2(h) of the regulations, when there are any changes, 
expirations, or withdrawals to previously submitted example contracts, 
then packers must submit revised example contracts and notify us of 
expirations and withdrawals within one business day after expiration or 
withdrawal. The packer's example contracts must represent all of the 
contracts made available by the packer to swine producers for the 
purchase of swine for slaughter. The packer may submit example 
contracts and notifications electronically.
    What criteria will packers use to select example contracts? To 
decide which contracts will serve as examples of similar contracts, as 
specified in section 206.2(d) of the regulations, packers will use the 
following criteria (four example-contract criteria):
    (1) The base price or the determination of base price;
    (2) The application of an accrual account or a ledger;
    (3) The carcass merit premium and discount schedules (including the 
manner of determining lean percent or other merits of the carcass that 
are used to determine the amount of the premiums and discounts and how 
those premiums and discounts are applied); and
    (4) The use and amount of noncarcass merit premiums and discounts.
    For contracts that are identical in all four example-contract 
criteria listed above, a packer will need to file only one example 
contract to represent that set of contracts for each plant that 
slaughters the swine purchased under the example contract.
    What must the packer provide for monthly reports? As specified in 
section 206.3 of the regulations, packers will submit monthly reports 
that will provide, for existing contracts, the estimated number of 
swine committed and the maximum number of swine that could be delivered 
under contract for each of the next 12 months, expansion clauses for 
each contract type, and specify the contract types for which the packer 
has any available contracts.
    The packer must provide a separate monthly report for each of the 
plants that it uses that has the slaughtering capacity specified in the 
definition of ``packer,'' even if it had no existing contracts for 
which to report estimated deliveries of swine. The packer must estimate 
the number of swine to be delivered under each contract at the plant, 
aggregated by contract type. If the packer had no existing contracts 
for any or all contract types, the reported estimates would be zero. 
GIPSA will notify the packer of the contract type for each example 
contract.
    What information from the swine contract library will GIPSA make 
available to the public? The example contracts will provide base price 
determinations, the application of ledgers or accrual accounts, carcass 
merit premium and discount schedules, and the use and amount of 
noncarcass merit premiums and discounts. Other contract terms that will 
be reported include a variety of terms, such as quality and weight 
restrictions, length of contract, and use of packer specified genetics. 
We will summarize information on contract terms from the example 
contracts to provide as much information about contract terms as 
possible, subject to confidentiality protections specified in section 
251 of the Agricultural Marketing Act of 1946 (7 U.S.C. 1636).
    We will publish in the monthly report as much information collected 
from packers each month as possible, subject to the requirement to 
maintain confidentiality as discussed above. We will calculate the 
aggregate 6- and 12-month totals from the information in the monthly 
reports received from all reporting packers and report the aggregates 
on a regional basis as listed below. We will use the same regions for 
reporting the monthly report estimate aggregates as described above for 
the summaries of contract terms from the contract library.
    What regions will GIPSA use for reporting? The information we make 
available will be presented on a regional basis, as specified in 
sections 206.2(f) and 206.3(g)(2) of the regulations. Among the factors 
we will consider in defining a region are: (1) Relevant marketing 
areas; (2) statutory requirements to maintain confidentiality and 
protect proprietary business information; and (3) AMS definitions of 
regions in its reports of swine prices.\11\
---------------------------------------------------------------------------

    \11\ Even with the differences between he contract information 
we report and prices reported by USDA AMS Market News, producers and 
other interested parties will be able to review the information for 
consistent regions to understand contract terms and prices paid for 
hogs purchased through various methods.
---------------------------------------------------------------------------

    For example, we will review the AMS regions for which AMS reports 
hog prices. If we determine that we can provide more information by 
splitting an AMS region into more than one region, then we will 
determine whether the information can be presented for smaller regions 
and maintain confidentiality. Alternately, if we determine that 
releasing information for an AMS region will not maintain 
confidentiality, then we will aggregate the information into larger 
regions that will maintain confidentiality.
    In order to ensure confidentiality, information will only be 
published if it is obtained from no fewer than three packers, and no 
packer represents a dominant portion of the region's total slaughter 
based on market share. The specific factor used to determine if a 
packer is dominant in the region will not be released, to further 
assure confidentiality by preventing anyone from using knowledge about 
the factor to reveal information that we will withhold. In any region 
or set of circumstances that leads us to be concerned about our ability 
to publish information while maintaining confidentiality, in addition 
to the expertise provided by GIPSA economists and industry experts, we 
will consult with USDA statisticians to ensure that confidentiality is 
maintained.
    To further maintain confidentiality and provide useful information, 
we may change the regions over time. Initially, based on our analysis 
of swine processing plants and the AMS regions, the information will be 
published for the regions listed below:
    [sbull] The Western U.S. region includes all states west of the 
Mississippi River.
    [sbull] The Western Cornbelt region includes Iowa, Kansas, 
Minnesota, Missouri, Nebraska, and South Dakota. (This region will also 
be included in the Western U.S. region.)
    [sbull] The Iowa/Minnesota region includes Iowa and Minnesota. 
(This region will also be included in the Western Cornbelt region.)
    [sbull] The Eastern Cornbelt region includes all states east of the

[[Page 47821]]

Mississippi River. (This region is the eastern half of the country, but 
is named Eastern Cornbelt for consistency with AMS regions.)
    We will monitor changes in the swine industry, feedback from 
producers and other interested parties about the summary reports, and 
other relevant information to determine if changes in reporting regions 
need to be considered.
    How will GIPSA make summary example contract and monthly report 
information available? As specified in sections 206.2(g) and 
206.3(g)(1) of the regulations, we will make the contract library 
information and monthly reports available on the Internet on the GIPSA 
Web site at http://www.usda.gov/gipsa/ and at the GIPSA Regional Office 
in Des Moines, Suite 317, 210 Walnut Street, Des Moines, IA 50309. The 
information available from the GIPSA Web site and at the regional 
office will be the same.
    Initially, summarized information from example contracts could be 
available as early as 2 months after the final rule becomes effective 
(30 days after packers will be required to submit example contracts for 
each of the plants that has the slaughtering capacity specified in the 
definition of ``packer'' as specified in section 206.1). Subsequent 
information on new example contracts made available by packers will be 
available on a real-time basis, to the extent possible (packers must 
send GIPSA new example contracts within one business day of the 
contract being made available). The method and time of delivery and the 
complexity of contract terms will determine how quickly GIPSA can make 
the information available. Initially, summarized monthly report 
information could be available as early as 3 months after the final 
rule becomes effective (the first day of the month following packers' 
first monthly report submission.). Subsequent summarized monthly 
reports will be available the 1st of each month (2 weeks following the 
packers' monthly report submission).

Executive Order 12866 and Regulatory Flexibility Act

    This rule has been determined to be significant for the purposes of 
Executive Order 12866, and therefore, has been reviewed by the Office 
of Management and Budget. The following is an economic analysis of the 
rule that includes the cost-benefit analysis required by Executive 
Order 12866. The economic analysis also provides a final regulatory 
flexibility analysis of the potential economic effects on small 
entities as required by the Regulatory Flexibility Act (5 U.S.C. 601--
612).
    This rule implements Subtitle B of Title II of the P&S Act, which 
requires packers to report to the Secretary information for swine 
packing plants that have the slaughtering capacity specified in the 
subtitle's definition of ``packer.'' The rule requires the reporting of 
information on swine marketing contracts by packers for plants that 
have the slaughtering capacity specified in the definition of 
``packer.''
    Each packer purchasing at least 100,000 swine per year must report 
information for swine processing plants it owns or at which it has 
swine slaughtered that slaughtered an average of 100,000 head of swine 
per year during any of the immediately preceding 5 calendar years based 
on those years in which the plant slaughtered swine. Based on data 
including 2002, the most recent year for which complete data are 
available, this includes a total of 53 plants owned or utilized by 33 
swine packers.
    The rule establishes a swine contract library and requires packers 
operating or utilizing plants of the specified slaughtering capacity to 
submit example contracts and monthly reports to provide numbers of 
swine committed to packers under contract. We believe that this 
information program will benefit producers, especially small producers. 
It will increase information available to producers about contract 
terms, as well as improve producers' and packers' ability to plan with 
improved knowledge of the volume of swine already contracted for 
slaughter.

Summary of Costs

    No costs will be imposed on producers as a result of the 
regulations. Monthly reports and information from the contract library 
on contract terms will be available on the GIPSA Web site on the 
Internet. Producers with Internet access will be able to access the 
reports at no additional cost beyond their normal Internet costs. We 
believe that many producer organizations and private news and 
information services will copy and redistribute these reports at no 
direct cost to producers as part of the services they already provide 
to producers.
    Packers required to report will face costs associated with 
submitting contracts for the contract library. The first component of 
these costs is the initial cost of compiling and providing to GIPSA a 
copy of each example contract currently in effect or available at each 
plant that has the slaughtering capacity specified in the definition of 
``packer'' in section 206.1. As specified in the definition of 
``contract'' in section 206.1, this term includes written and verbal 
agreements. To submit example contracts for verbal agreements, packers 
will need to provide written descriptions of the verbal agreement. The 
second component is the cost of providing a copy of each new example 
contract subsequently made available by the packer. We estimate the 
hourly cost of these activities will average $20 per hour.
    Based on our experience reviewing swine contracts in the normal 
course of enforcing the P&S Act, we believe that the time required for 
a packer to review its contracts, identify example contracts, and 
submit those examples as a package (including documenting verbal 
contracts) will average 9 hours per plant for the initial submission.
    The first component of the 9 hours is an initial 4 hours to review 
the files of contracts and identify examples of existing and available 
contracts. Packers must identify which contracts are identical for 
reporting purposes, as specified in section 206.2(d) of the 
regulations, in order to determine which contracts need to be sent as 
examples.
    The second component of the 9 hours is an additional 5 hours to 
collect and submit example contracts to GIPSA. This is composed of 0.5 
hours per plant per example contract; we increased this estimate from 
the 0.25 hours estimated in the proposed rule to allow extra time for 
packers to review the guidelines developed for the submission of 
example contracts and the time to submit the example contracts 
electronically. Based on our experience reviewing swine contracts, we 
have determined that some packers will only have one example contract 
to report for each plant, while other packers will have a variety of 
example contracts. For this analysis and to provide an upper estimate 
for the costs associated with the contract library, we estimated that, 
on average, packers would have 10 example contracts per plant to be 
submitted to GIPSA for the initial filing. At 0.5 hours per plant per 
example contract, it would take 5 hours for the packer to collect and 
submit the 10 example contracts to GIPSA.
    The total one-time cost to compile the initial submission of 
example contracts for all 53 plants \12\ is $9,540 ($180 per plant x 53 
plants, which combines the first component of $20 per hour x 4 hours = 
$80 and the second component of $20 per hour x 0.5 hours x 10

[[Page 47822]]

example contracts = $100 per plant). There should be no additional cost 
for electronic submission because the submission will be through a 
secure Web site, which will be at no additional cost to those packers 
that have Internet access.
---------------------------------------------------------------------------

    \12\ The regulation will require a total of 33 pork packing 
companies (packers) to report for 53 plants that have the 
slaughtering capacity specified in the definition of ``packer'' in 
section 206.1, based on data including 2001, the most recent year 
for which complete data are available.
---------------------------------------------------------------------------

    After the initial submission, we estimate an average of about 2.5 
hours per year per plant will be required to submit an average of 5 
examples of new contracts or changes to previously submitted example 
contracts, at a cost per plant of $25.00 per year ($20/hour x 2.5 hours 
= $50). In months when a packer does not have a new contract or modify 
a previously submitted example contract, there will be no cost of 
compliance with contract library reporting requirements. Packers must 
notify GIPSA within one business day when one of its example contracts 
no longer represents any existing or available contracts. The costs for 
this notification are included in the estimate for changes to 
previously submitted contracts. The total annual recurring cost for all 
53 plants for the submission of examples of contract types is estimated 
to be $2,650 ($50 per plant x 53 plants).
    Packers also face costs in complying with the monthly reporting 
requirements. We believe that many packers already maintain the 
required information electronically for use in business and strategic 
planning. Based on our investigations and reviews of packers, we 
believe that all packers that are large enough to meet the statutory 
requirements for reporting already use computers.\13\ Therefore, we do 
not anticipate that the packers will incur any additional costs for 
computer hardware to implement electronic submissions of monthly 
reports. For those packers that use computers but do not currently 
maintain contract information electronically, we estimate that at most 
1 hour per plant, at an hourly cost of $50.00, will be required to set 
up a database or spreadsheet to maintain the necessary information. 
This estimate is based on our experience with spreadsheets and 
databases that are similar in type and complexity. The higher hourly 
wage rate for this activity is based on the use of personnel with 
specialized skills necessary to set up spreadsheets or databases. The 
creation of spreadsheets or databases to maintain the necessary 
information can be accomplished by in-house computer staff, or by other 
employees such as accountants or auditors who are responsible for 
operating the packer's electronic recordkeeping system. The total one-
time cost for packers to set up a database or spreadsheet to maintain 
information for the monthly report for all 53 plants is estimated to be 
$2,650 ($50 per plant x 53 plants) if packers choose to submit reports 
electronically for all 53 plants.
---------------------------------------------------------------------------

    \13\ Most, if not all, of these packers are required to use an 
electronic system to provide information to AMS under mandatory 
livestock price reporting requirements in the AMA (7 U.S.C. 
1636(g)).
---------------------------------------------------------------------------

    An additional 2 hours per plant, at the estimated hourly cost of 
$50.00 per hour for a total one-time cost of $100.00 per plant, will be 
required for personnel with similar skills in use of electronic 
recordkeeping systems to extract and format the required information 
from the packer's electronic information and develop methods for 
electronic transmission of the completed reports to GIPSA. Upon 
request, we will provide the necessary information for the interface to 
our system. Packers that do not use electronic data transmission will 
not incur this initial set-up cost, but will not gain the advantage of 
potential savings from electronic recordkeeping and reporting as 
described below. The total one-time cost for packers to extract and 
format information and develop methods for electronic transmission for 
the monthly report for all 53 plants is estimated to be $5,300 ($100 
per plant x 53 plants) if the packers choose to submit reports 
electronically for all 53 plants.
    Once a recordkeeping and reporting system is established, 
additional time will be required to enter data into the database or 
spreadsheet each month. Packers that choose not to use an electronic 
system for maintaining and compiling data required for the monthly 
reports will manually compile the data on paper forms each month; the 
forms will be available from the Des Moines regional office. The total 
time required for either method will depend on the number of contracts 
in effect.
    Based on our experience in working with similar documents and data 
entry processes, we estimate that it will take an average of 2 hours 
per month per plant to manually compile and report the figures needed 
for the monthly reporting provision. The initial monthly report may 
take somewhat longer than 2 hours.
    We estimate the cost per hour of this activity will average $20.00 
per hour, for a total monthly cost per plant of $40.00 ($20 per hour x 
2 hours = $40). A packer using an electronic system to compile reports 
will face lower monthly compliance costs than a packer that does not 
use an electronic system. We estimate that a packer utilizing 
electronic systems will take an average of 1 hour per month per plant 
at a total cost per plant of $20.00 to compile and report the monthly 
estimates. The total annual recurring cost per plant to compile and 
submit the monthly report is $480 ($40 per month x 12 months) if the 
packer chooses to submit reports manually or $240 ($20 per month x 12 
months) if the packer chooses to submit reports electronically. The 
total annual recurring cost for all 53 plants to compile and submit the 
monthly report is estimated to be $25,440 ($480 per plant x 53 plants) 
if the packers choose to submit reports manually for all 53 plants or 
$12,720 ($240 per plant x 53 plants) if the packers choose to submit 
reports electronically for all 53 plants.
    The following table summarizes the estimated compliance costs for 
packers required to submit example contracts and monthly contract 
information for plants that are subject to the regulations in 9 CFR 
Part 206. As shown in the table, total first year costs for all 33 
packers (53 plants) to comply with the requirements of the contract 
library and monthly reports is $37,630 if the packers choose to submit 
reports manually for all 53 plants or $32,860 if the packers choose to 
submit reports electronically for all 53 plants. The total first year 
costs include the start-up costs, therefore, the annual recurring costs 
will be lower and are estimated to be $28,090 if the packers choose to 
submit reports manually for all 53 plants or $15,370 if the packers 
choose to submit reports electronically for all 53 plants.

[[Page 47823]]



----------------------------------------------------------------------------------------------------------------
                                                                                                     Total costs
                                                                                                      if packers
                                                                            Costs per   Total costs      use
                                                               Costs per      plant,     if packers   electronic
                                                                 plant,     electronic   use manual  methods for
                                                                 manual      monthly    methods for    monthly
                                                                             reports       all 53    reports for
                                                                                         plants \1\     all 53
                                                                                                      plants \1\
----------------------------------------------------------------------------------------------------------------
Start-Up Costs:
    Contract Library:
        Review contracts, identify example contracts (4            $80.00       $80.00    $4,240.00    $4,240.00
         hours x $20.00/hr).................................
        Collect and submit example contracts \2\ (10              $100.00      $100.00    $5,300.00    $5,300.00
         examples x 0.5 hr. x $20.00 per hour)..............
    Monthly Report:
        Set up database or spreadsheet (1 hour x $50.00)....          N/A       $50.00          N/A    $2,650.00
        Development of transmission methods (2 hours x                N/A      $100.00          N/A    $5,300.00
         $50.00)............................................
                                                             --------------
          Total Start-Up Costs..............................      $180.00      $330.00    $9,540.00   $17,490.00
                                                             ==============
Annual Recurring Costs:
Contract Library: Collect and submit example contracts (5          $50.00       $50.00    $2,650.00    $2,650.00
 examples x 0. 5 hr. x $20.00 per hour)
    Monthly Report: Enter data into database or spreadsheet,
     or tabulate on paper, and compile totals:
        (Electronic: 1 hour per month x 12 x $20.00)........          N/A      $240.00          N/A   $12,720.00
        (Manual: 2 hours per month x 12 x $20.00)...........      $480.00          N/A   $25,440.00          N/A
                                                             --------------
          Total Annual Recurring Costs......................      $530.00      $290.00   $28,090.00   $15,370.00
-------------------------------------------------------------
          Total 1st Year Cost (Start-up costs plus annual         $710.00      $620.00   $37,630.00   $32,860.00
           recurring costs).................................
----------------------------------------------------------------------------------------------------------------
\1\ Although we believe it is likely that most packers will use electronic methods, we do not have a basis for
  estimating the actual number of packers that will choose to use electronic versus manual methods. Thus,
  estimates are shown for the alternatives of all manual submissions versus all electronic submissions to
  provide a range of the likely total costs to packers.
\2\ We are not assuming any electronic submission of contracts for purposes of this analysis because it is
  likely that many of the plants will submit the information directly and the plants may not have the electronic
  version of the contracts.

    GIPSA will incur costs of operating the swine contract library, 
analyzing the monthly reports submitted by packers, ensuring that 
packers are in compliance, and making the information available at the 
P&SP regional office and on the GIPSA Web site. We estimate that GIPSA 
will incur total costs of $400,000 per year for all activities, 
specified below, associated with implementing the swine contract 
library. We will monitor and review contracts submitted for the 
contract library and monthly reports filed by packers to assure 
completeness, consistency, and accuracy. In addition, we will conduct 
ongoing analyses of the data and information obtained from packers, and 
will explore ways to increase the usefulness of the published data and 
information. Our projected costs include communication costs, travel 
expense for plant visits to monitor compliance with the swine contract 
library sections of the P&S Act and regulations, costs for office 
supplies, computer hardware and software acquisition and maintenance.
    We anticipate that our costs for providing assistance to packers 
and maintaining the contract library will decrease over time. As a 
packer becomes familiar with the regulations, it will need less 
assistance from us. Once the analysis of the initial submission of 
contracts is complete, there will be fewer contracts received for 
analysis.

Summary of Benefits

    The primary economic benefit of the contract library to producers 
will be to alleviate some of the current imbalance in information 
between producers and packers by increasing the amount of information 
available to producers and to provide producers the potential to 
improve overall production planning and marketing efficiency. Many 
producers report that they cannot currently obtain the information 
needed to compare contracts available from different packers. Producers 
may have very limited information, especially about contracts and 
contracting practices, since producers are parties to fewer contracts 
and have fewer resources for searching out this information than do 
packers. Based on GIPSA's contacts with producers, we believe that most 
producers currently do not search out contract terms among competing 
packers. Rather, they tend to contract with and deliver their hogs to a 
single packer. Producers have indicated to GIPSA that they do not have 
enough knowledge about contract terms available to them to encourage 
them to search out more favorable terms.
    This rule will make information about the variety and types of 
contract terms available in the marketplace, as well as the number of 
swine committed under contract by region, readily and easily available 
from a single source. Availability of information from example 
contracts and monthly reports will serve to lower the search costs for 
producers and enable producers to be more informed before entering the 
marketplace.
    This increased information will be beneficial to producers in 
making production plans and determining how to market swine. The 
increased information about which contract types and contract terms are 
available will enable producers to understand the particular terms that 
are available. For example, different packers often have different 
requirements for swine with given carcass characteristics, and the 
packers' premiums and discounts reflect the unique requirements.\14\ 
The information from the contracts will make producers aware of 
contract terms that better match the characteristics of

[[Page 47824]]

the swine they produce. Although the contract information will not 
identify which packers have specific contract terms available, 
producers will know that specific terms are available at a plant in 
identified regions.
---------------------------------------------------------------------------

    \14\ For example, one analysis found that net prices paid by 
different packers for the same quality of hogs varied by up to $2.00 
per hundredweight. (``Factors That Influence Prices Producers 
Receive for Hogs: Statistical Analysis of Kill Sheet and Survey 
Data,'' John D. Lawrence, Staff Paper No. 279, Iowa State 
University. March 1996.)
---------------------------------------------------------------------------

    Additionally, the monthly reports will provide producers with 
information on the number of contracted swine by region for the 
upcoming 6- and 12-month periods. Producers could use this information, 
in combination with data such as current inventories of swine on feed 
from the National Agricultural Statistics Service and projections of 
slaughter from land grant college extension services and other sources, 
to estimate the percentage of the region's swine slaughter requirements 
for the next 6 and 12 months that are being met by contracted swine. 
This will help producers to determine how many sows to breed, whether 
to search out packers in regions with lower volumes of swine already 
contracted, and to make other decisions related to the production and 
marketing of their swine. For example, knowledge of the volume of swine 
already contracted for delivery 12 months into the future will better 
enable producers to adjust their production plans to avoid situations 
such as occurred during a prolonged period in late 1998. During that 
period, extremely large supplies of swine for slaughter were out of 
balance with aggregate industry slaughter capacity and producers 
suffered losses in the billions of dollars.
    By lowering the search costs for producers and increasing the 
amount of available information, information made available from 
example contracts and the monthly reports will alleviate much of the 
current imbalance in information available to producers relative to 
packers. The benefits are difficult, if not impossible, to quantify, 
but available evidence indicates the benefits will be substantial. We 
believe that benefits to producers, from the availability of contract 
terms and packers' estimates of future deliveries, will include better 
planning for their marketing decisions.
    We envision that the primary means of access to information from 
the example contracts and monthly reports will be through the GIPSA Web 
site on the Internet. The information will also be available in hard 
copy in our regional office located in Des Moines, Iowa. We believe 
that many producers have access to the Internet; for those who do not, 
we have coordinated with other USDA agencies with officers at the local 
level to provide Internet access, or producers could use public 
libraries with Internet service available, as many across the country 
do. Therefore, this method of providing the information will make it 
available to the widest possible audience in the most efficient way. We 
believe that many producer organizations and private news and 
information services will copy and redistribute these reports at no 
direct cost to producers as part of the services they already provide 
to producers.
    Although packers will bear the compliance costs of the regulations, 
packers are not the primary beneficiaries of the contract library. The 
chief benefit to the packers will be from improved knowledge about 
aggregate supply based on information provided in the monthly reports 
of aggregate future supplies of swine contracted for slaughter and 
knowledge of contract terms being made available by other packers.
    In conclusion, the benefits to producers and other interested 
persons are not quantifiable and, therefore, difficult to compare to 
the costs that packers and GIPSA will incur to implement the swine 
contract library requirements of the amendments to the P&S Act. The 
total annual cost for GIPSA to implement the contract library and 
monthly reports is $400,000. The total first-year costs for packers 
choosing to utilize electronic submission methods is estimated to be 
$330 per plant with an annual recurring costs thereafter of an 
estimated $290 per plant; the total first-year cost for packers 
choosing to use manual submission methods is estimated to be $710 with 
an annual recurring cost thereafter estimated at $530 per plant. We 
believe all packers required to report have the capability to use 
electronic methods. However, we do not have an estimate for how many 
packers will choose to use electronic versus manual methods. Thus, for 
purposes of comparing costs and benefits, we are conservatively using 
the highest cost, which is based on all packers using manual methods to 
submit example contracts and monthly reports. Using this conservative 
estimate, the total first-year cost to the industry is $37,630 and 
annual recurring cost thereafter is $28,090. We requested comments on 
these estimates and on the likelihood that packers will use electronic 
methods; none of the commenters provided this information. 
Additionally, the benefits to the producer will be an increase in the 
knowledge about supply and contract terms that could result in better 
marketing decisions. These benefits are difficult, if not impossible, 
to quantify. We requested commenters to provide additional information 
on the benefits of this regulation and the quantification of those 
benefits; none of the commenters provided any additional information.

Effects on Small Entities

    The Small Business Administration (SBA) classifies producers' swine 
production enterprises as small businesses if they have annual sales of 
$500,000 or less. There were approximately 92,000 producers that would 
be classified as small businesses by this definition, or 90 percent of 
all producers reporting sales of swine in the 1997 Census of 
Agriculture. The rule will not impose any reporting requirement or 
other burden on producers of any size. We believe the rule will provide 
significant benefits for all producers, as discussed in the section on 
Summary of Benefits above, and especially to small producers.
    According to the SBA size standard, a company that owns and 
operates a packing plant, including a swine processing plant, would be 
classified as a small business if the company has less than 500 
employees in total. It is common in the red meat industry for larger 
companies to own several plants. A packer that owns and operates one or 
more plants would be considered as a small business under the SBA 
definition only if the packer, at all plants combined, had fewer than 
500 employees.
    The regulation will require a total of 33 pork packing companies 
(packers) to report for 53 plants that have the slaughtering capacity 
specified in the definition of ``packer'' in section 206.1. We have 
minimized the number of small entities that would have been required to 
comply with the swine contract library regulations as proposed by 
limiting the packers to those that purchase at least 100,000 swine per 
year. Based on the SBA size standard, approximately 15 of the packers 
that will be required to report, are considered small businesses. These 
small packers will bear some costs of compliance with the regulation. 
The costs, as described above in Summary of Costs, arise from the 
reporting and recordkeeping requirements for the packers that are 
required to report. The same requirements will be imposed on large and 
small packers that are required to report. However, we believe the 
burden of these requirements will be less on the packers classified as 
small businesses, as explained below.

Projected Reporting Burden on Small Entities

    The rule requires packers to report two types of information 
regarding contracts for the purchase of swine for slaughter. The first 
type is an example

[[Page 47825]]

of each contract (called an ``example contract'') currently in effect 
or available by packers at each plant required to report under section 
206.1. Packers must provide an initial submission of example contracts 
for existing and available contracts and subsequent submissions of 
example contracts for new contracts. A copy of an example contract will 
only be submitted once for each plant. Based on prior contacts with 
packers by GIPSA personnel during the normal course of enforcing the 
P&S Act, we believe that small packers have a relatively small number 
of example contracts that will have to be submitted. Packers will 
submit example contracts by mail, electronic data transmission, or 
another method that is convenient for them and approved by GIPSA. We 
will use the information in these contracts to prepare a report for 
public release that will describe the contract types and contract terms 
existing or available, but will not identify individual packers of any 
size, or release copies of actual individual contracts used by any 
packer. We will make the report with the information from the example 
contracts available on the Internet and at our regional office located 
in Des Moines, Iowa.
    The second type of information reported by packers will consist of 
a monthly report of the number of swine committed for delivery under 
each type of existing contract. The form for the monthly report will 
consist of up to 196 separate fields of information, including report 
date, packer, plant identification, and certification information (16 
fields); swine delivery estimates for 6 contract type categories for 
each of the next 12 months (up to 144 fields for committed and maximum 
estimates); yes or no for any currently available contracts under a 
category of contract type (up to 6 fields); codes for the types of 
expansion clauses in existing contracts to increase swine deliveries to 
the maximum estimate (up to 6 fields); and the dates for which the 
estimates are provided (24 fields). A packer will fill out 196 fields 
of information for a plant that had one or more contracts under each of 
the six contract types. Packers must report this information once each 
month for each plant for which it is required to report under the 
regulations. If 196 fields of information were required per submission, 
a packer will report up to 196 pieces of information each month for 
each plant. However, few if any packers will have contracts of such 
variety as to be required to complete all fields on any given monthly 
report. We expect that the average monthly report of packers of any 
size will require entry of data into 68 to 94 fields. Packers will 
compile and aggregate data from individual contracts to enter into 
these fields. Small packers that meet the minimum purchasing and 
slaughtering capacity required for reporting are expected to have a 
smaller number of contracts from which to compile data. Therefore, the 
total reporting burden for smaller packers should be less than for the 
larger packers.
    We encourage packers to utilize electronic data transmission to 
submit the required information to GIPSA. We will provide packers the 
necessary information on procedures to submit the data to GIPSA 
electronically. We expect that packers will use a variety of methods to 
provide the data to GIPSA. For electronic data transmission, we will 
provide a secure system to allow packers to submit data via the 
Internet through the GIPSA Web site.
    Those small packers that choose not to use electronic submission 
methods for example contract information and monthly reports can send 
the information via facsimile or mail to GIPSA. However, a packer will 
have to meet the submission deadlines regardless of the method used for 
submission.

Projected Recordkeeping Burden on Small Entities

    Each packer that is required to report information is required to 
maintain such records as are necessary to compile the information 
reported and verify its accuracy. Current P&S Act recordkeeping 
requirements are set out in 7 U.S.C. 221, 9 CFR 201, and 9 CFR 203.4. 
This rule does not require maintenance of records beyond those that 
packers are already required to maintain. Therefore, the rule does not 
create new, unduly burdensome recordkeeping requirements. Professional 
skills required for recordkeeping under the rule are no different than 
those already employed by the reporting entities. However, packers may 
need to extract and format the required information for submissions to 
GIPSA. We believe the skills needed to maintain such records are 
already in place at those small packers affected by the rule.

Alternatives

    We considered alternative methods by which the objectives of the 
statute and implementing regulations could be accomplished. The 
regulations, as mandated by the Livestock Mandatory Reporting Act, 
require packers that own or use swine packing plants that slaughter a 
specified number of swine each year to provide certain information to 
the Secretary. There were few feasible alternatives possible with 
regard to obtaining the required information.
    In the proposed rule, we required any packer, regardless of size, 
to comply with the swine contract library requirements if the packer 
used a plant that met the slaughter capacity specified in the 
definition of packer in section 201.1 of the regulations. However, 
there are a number of small packers that buy small amounts of swine and 
have the swine custom slaughtered at a plant large enough to require 
the packer to report. To eliminate the potential burden on such small 
packers, we revised the rule to add a minimum annual purchase of 
100,000 swine to the definition of ``packer.'' Therefore, these small 
packers are not covered by the swine contract library regulations.
    The example contract requirement for filing contract types in use 
could be accomplished by requiring that packers file copies of all 
contracts, not just example contracts. However, we believe this would 
result in an overwhelming and unnecessary paperwork burden for both 
packers and GIPSA. It would require all packers required to report to 
submit multiple copies of the same contract. It would also require a 
significant increase in expense to the government for the time required 
to review and classify all the contracts received.
    The monthly report requirement could be accomplished by GIPSA 
compiling all data necessary for the monthly report to determine each 
individual packer's projected deliveries of swine for slaughter for the 
following 6- and 12-month periods. This alternative would require that 
we also implement the first alternative discussed above (that is, 
require packers to file all contracts) for GIPSA to have the necessary 
details to compile the data each month. In addition to the cost to the 
government of collecting all contracts, it would add significant 
additional costs to the government to tabulate data each month from all 
contracts submitted by packers.
    We also considered the option of requiring electronic submission of 
the information required in the monthly report. Under the P&S Act, 
packers are required to submit information on various forms, and 
packers are used to submitting the information via facsimile or mail. 
Therefore, we decided to consider that a packer would expect to submit 
this information in the same format in which it submits other 
information. Probably all of the packers that will be required to 
submit information for the swine contract

[[Page 47826]]

library will have the capability to submit the required information 
electronically. The required information will be plant level 
information and some packers may choose to have the plant submit the 
information directly to GIPSA. Even though the packer may have the 
capability to submit information electronically, that capability may 
not exist at each of the plants. In addition, the option that we 
developed for the electronic submission of monthly reports is via data 
entry into an automated form on the Web site on the Internet; the 
automated form is the same as the hard copy form. We believe that the 
collection of this information would be most successful by providing a 
variety of options for submission. Therefore, in developing these 
regulations, we decided that the reporting objectives could be 
accomplished by allowing packers to report the required information by 
facsimile or mail if they choose not to use electronic submission. 
Although we will encourage packers to utilize electronic data 
transmission, and we will provide to packers the necessary information 
on procedures to submit data to GIPSA electronically, we expect that 
packers will use a variety of methods to provide the data to GIPSA. For 
electronic data transmission, we will provide a secure system to allow 
packers to submit data via the Internet through the GIPSA Web site.
    In conclusion, as shown above, it is difficult to quantify all of 
the economic impacts on small entities based on the alternative 
submission methods that small packers may choose and the anticipated 
benefits, especially for small producers. Small packers will incur the 
costs of complying with these regulations; however, only 15 small 
packers, representing a small percentage of all small packers in the 
United States, would be required to comply with these regulations 
because these 15 packers purchase more than 100,000 swine annually and 
have swine slaughtered at a slaughtering plant that slaughtered an 
average of more than 100,000 swine per year. We believe that all of the 
approximately 92,000 small producers will accrue benefits at little or 
no cost. Therefore, we believe that the balance of the economic impact 
on small entities will be positive.

Executive Order 12988

    This rule has been reviewed under E.O. 12988, Civil Justice Reform, 
and is not intended to have retroactive effect. This rule will not pre-
empt State or local laws, regulations, or policies unless they present 
an irreconcilable conflict with this rule. There are no administrative 
procedures that must be exhausted prior to any judicial challenge to 
the provisions of this rule.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3520), the information collection or recordkeeping requirements 
included in this rule have been approved by the Office of Management 
and Budget (OMB) under OMB control number 0580-0021.

GPEA Compliance

    GIPSA is committed to compliance with the Government Paperwork 
Elimination Act, which requires Government agencies to provide the 
public option of submitting information or transacting business 
electronically to the maximum extent possible.

List of Subjects in 9 CFR Part 206

    Swine, Reporting and recordkeeping requirements.


0
For the reasons set forth in the preamble, GIPSA amends 9 CFR Chapter 
II as follows:
0
1. Add Part 206 to read as follows:

PART 206--SWINE CONTRACT LIBRARY

Sec.
206.1 Definitions.
206.2 Swine contract library.
206.3 Monthly report.

    Authority: Sec. 941, Pub. L. 106-78, 113 Stat. 1135; 7 CFR 2.22 
and 2.81.


Sec.  206.1  Definitions.

    The definitions in this section apply to the regulations in this 
part. The definitions in this section do not apply to other regulations 
issued under the Packers and Stockyards Act (P&S Act) or to the P&S Act 
as a whole.
    Accrual account. (Synonymous with ``ledger,'' as defined in this 
section.) An account held by a packer on behalf of a producer that 
accrues a running positive or negative balance as a result of a pricing 
determination included in a contract that establishes a minimum and/or 
maximum level of base price paid. Credits and/or debits for amounts 
beyond these minimum and/or maximum levels are entered into the 
account. Further, the contract specifies how the balance in the account 
affects producer and packer rights and obligations under the contract.
    Base price. The price paid for swine before the application of any 
premiums or discounts, expressed in dollars per unit.
    Contract. Any agreement, whether written or verbal, between a 
packer and a producer for the purchase of swine for slaughter, except a 
negotiated purchase (as defined in this section).
    Contract type. The classification of contracts or risk management 
agreements for the purchase of swine committed to a packer, by the 
determination of the base price and the presence or absence of an 
accrual account or ledger (as defined in this section). The contract 
type categories are:
    (1) Swine or pork market formula purchases with a ledger,
    (2) Swine or pork market formula purchases without a ledger,
    (3) Other market formula purchases with a ledger,
    (4) Other market formula purchases without a ledger,
    (5) Other purchase arrangements with a ledger, and
    (6) Other purchase arrangements without a ledger.
    Formula price. A price determined by a mathematical formula under 
which the price established for a specified market serves as the basis 
for the formula.
    Ledger. (Synonymous with ``accrual account,'' as defined in this 
section.) An account held by a packer on behalf of a producer that 
accrues a running positive or negative balance as a result of a pricing 
determination included in a contract that establishes a minimum and/or 
maximum level of base price paid. Credits and/or debits for amounts 
beyond these minimum and/or maximum levels are entered into the 
account. Further, the contract specifies how the balance in the account 
affects producer and packer rights and obligations under the contract.
    Negotiated purchase. A purchase, commonly known as a ``cash'' or 
``spot market'' purchase, of swine by a packer from a producer under 
which:
    (1) The buyer-seller interaction that results in the transaction 
and the agreement on actual base price occur on the same day; and
    (2) The swine are scheduled for delivery to the packer not later 
than 14 days after the date on which the swine are committed to the 
packer.
    Noncarcass merit premium or discount. An increase or decrease in 
the price for the purchase of swine made available by an individual 
packer or packing plant, based on any factor other than the 
characteristics of the carcass, if the actual amount of the premium or 
discount is known before the purchase and delivery of the swine.
    Other market formula purchase. A purchase of swine by a packer in 
which the pricing determination is a formula price based on any market 
other than

[[Page 47827]]

the markets for swine, pork, or a pork product. The pricing 
determination includes, but is not limited to:
    (1) A price formula based on one or more futures or options 
contracts;
    (2) A price formula based on one or more feedstuff markets, such as 
the market for corn or soybeans; or
    (3) A base price determination using more than one market as its 
base where at least one of those markets would be defined as an ``other 
market formula purchase.''
    Other purchase arrangement. A purchase of swine by a packer that is 
not a negotiated purchase, swine or pork market formula purchase, or 
other market formula purchase, and does not involve packer-owned swine.
    Packer. Any person engaged in the business of buying swine in 
commerce for purposes of slaughter, of manufacturing or preparing meats 
or meat food products from swine for sale or shipment in commerce, or 
of marketing meats or meat food products from swine in an 
unmanufactured form acting as a wholesale broker, dealer, or 
distributor in commerce. The regulations in this part only apply to a 
packer purchasing at least 100,000 swine per year and slaughtering 
swine at a federally inspected swine processing plant that meets either 
of the following conditions:
    (1) A swine processing plant that slaughtered an average of at 
least 100,000 swine per year during the immediately preceding 5 
calendar years, with the average based on those periods in which the 
plant slaughtered swine; or
    (2) Any swine processing plant that did not slaughter swine during 
the immediately preceding 5 calendar years that has the capacity to 
slaughter at least 100,000 swine per year, based on plant capacity 
information.
    Producer. Any person engaged, either directly or through an 
intermediary, in the business of selling swine to a packer for 
slaughter (including the sale of swine from a packer to another 
packer).
    Swine. A porcine animal raised to be a feeder pig, raised for 
seedstock, or raised for slaughter.
    Swine or pork market formula purchase. A purchase of swine by a 
packer in which the pricing determination is a formula price based on a 
market for swine, pork, or a pork product, other than a futures 
contract or option contract for swine, pork, or a pork product.


Sec.  206.2  Swine contract library.

    (a) Do I need to provide swine contract information? Each packer, 
as defined in Sec.  206.1, must provide information for each swine 
processing plant that it operates or at which it has swine slaughtered 
that has the slaughtering capacity specified in the definition of 
packer in Sec.  206.1.
    (b) What existing or available contracts do I need to provide and 
when are they due? Each packer must send, to the Grain Inspection, 
Packers and Stockyards Administration (GIPSA), an example of each 
contract it currently has with a producer or producers or that is 
currently available at each plant that it operates or at which it has 
swine slaughtered that meets the definition of packer in Sec.  206.1. 
This initial submission of example contracts is due to GIPSA on the 
first business day of the month following the determination that the 
plant has the slaughtering capacity specified in the definition of 
packer in Sec.  206.1.
    (c) What available contracts do I need to provide and when are they 
due? After the initial submission, each packer must send GIPSA an 
example of each new contract it makes available to a producer or 
producers within one business day of the contract being made available 
at each plant that it operates or at which it has swine slaughtered 
that meets the definition of packer in Sec.  206.1.
    (d) What criteria do I use to select example contracts? For 
purposes of distinguishing among contracts to determine which contracts 
may be represented by a single example, contracts will be considered to 
be the same if they are identical with respect to all of the following 
four example-contract criteria:
    (1) Base price or determination of base price;
    (2) Application of a ledger or accrual account (including the terms 
and conditions of the ledger or accrual account provision);
    (3) Carcass merit premium and discount schedules (including the 
determination of the lean percent or other merits of the carcass that 
are used to determine the amount of the premiums and discounts and how 
those premiums and discounts are applied); and
    (4) Use and amount of noncarcass merit premiums and discounts.
    (e) Where and how do I send my contracts? Each packer may submit 
the example contracts and notifications required by this section by 
either of the following two methods:
    (1) Electronic report. Example contracts and notifications required 
by this section may be submitted by electronic means. Electronic 
submission may be by any form of electronic transmission that has been 
determined to be acceptable to the Administrator. To obtain current 
options for acceptable methods to submit example contracts 
electronically, contact GIPSA through the Internet on the GIPSA Web 
site (http://www.usda.gov/gipsa/) or at USDA GIPSA, Suite 317, 210 
Walnut Street, Des Moines, IA 50309.
    (2) Printed report. Each packer that chooses to submit printed 
example contracts and notifications must deliver the printed contracts 
and notifications to USDA GIPSA, Suite 317, 210 Walnut Street, Des 
Moines, IA 50309.
    (f) What information from the swine contract library will be made 
available to the public? GIPSA will summarize the information it has 
received on contract terms, including, but not limited to, base price 
determination and the schedules of premiums or discounts. GIPSA will 
make the information available by region and contract type as defined 
in Sec.  206.1, for public release one month after the initial 
submission of contracts. Geographic regions will be defined in such a 
manner to provide as much information as possible while maintaining 
confidentiality in accordance with section 251 of the Agricultural 
Marketing Act (7 U.S.C. 1636).
    (g) How can I review information from the swine contract library? 
The information will be available on the Internet on the GIPSA Web site 
(http://www.usda.gov/gipsa/) and at USDA GIPSA, Suite 317, 210 Walnut 
Street, Des Moines, IA 50309. The information will be updated as GIPSA 
receives information from packers.
    (h) What do I need to do when a previously submitted example 
contract is no longer a valid example due to contract changes, 
expiration, or withdrawal? Each packer must submit a new example 
contract when contract changes result in changes to any of the four 
example-contract criteria specified in paragraph (d) of this section 
and notify GIPSA if the new example contract replaces the previously 
submitted example contract. Each packer must notify GIPSA when an 
example contract no longer represents any existing or available 
contract (expired or withdrawn). Each packer must submit these example 
contracts and notifications within one business day of the change, 
expiration, or withdrawal.

(Approved by the Office of Management and Budget under control 
number 0580-0021)


Sec.  206.3  Monthly report.

    (a) Do I need to provide monthly reports? Each packer, as defined 
in Sec.  206.1, must provide information for each swine processing 
plant that it operates or at which it has swine slaughtered that has 
the slaughtering

[[Page 47828]]

capacity specified in the definition of packer.
    (b) When is the monthly report due? Each packer must send a 
separate monthly report for each plant that has the slaughtering 
capacity specified in the definition of packer in Sec.  206.1. Each 
packer must deliver the report to the GIPSA Regional Office in Des 
Moines, IA, by the close of business on the 15th of each month, 
beginning at least 45 days after the initial submission of example 
contracts. The GIPSA Regional Office closes at 4:30 p.m. Central Time. 
If the 15th day of a month falls on a Saturday, Sunday, or federal 
holiday, the monthly report is due no later than the close of the next 
business day following the 15th.
    (c) What information do I need to provide in the monthly report? 
The monthly report that each packer files must be reported on Form 
P&SP-341, which will be available on the Internet on the GIPSA Web site 
(http://www.usda.gov/gipsa/) and at USDA GIPSA, Suite 317, 210 Walnut 
Street, Des Moines, IA 50309. In the monthly report, each packer must 
provide the following information:
    (1) Number of swine to be delivered under existing contracts. 
Existing contracts are contracts the packer currently is using for the 
purchase of swine for slaughter at each plant. Each packer must provide 
monthly estimates of the number of swine committed to be delivered 
under all of its existing contracts (even if those contracts are not 
currently available for renewal or to additional producers) in each 
contract type as defined in Sec.  206.1.
    (2) Available contracts. Available contracts are the contracts the 
packer is currently making available to producers, or is making 
available for renewal to currently contracted producers, for the 
purchase of swine for slaughter at each plant. On the monthly report, a 
packer will indicate each contract type, as defined in Sec.  206.1, 
that the packer is currently making available.
    (3) Estimates of committed swine. Each packer must provide an 
estimate of the total number of swine committed under existing 
contracts for delivery to each plant for slaughter within each of the 
following 12 calendar months beginning with the 1st of the month 
immediately following the due date of the report. The estimate of total 
swine committed will be reported by contract type as defined in Sec.  
206.1.
    (4) Expansion clauses. Any conditions or circumstances specified by 
clauses in any existing contracts that could result in an increase in 
the estimates specified in paragraph (c)(3) of this section. Each 
packer will identify the expansion clauses in the monthly report by 
listing a code for the following conditions:
    (i) Clauses that allow for a range of the number of swine to be 
delivered;
    (ii) Clauses that require a greater number of swine to be delivered 
as the contract continues;
    (iii) Other clauses that provide for expansion in the numbers of 
swine to be delivered.
    (5) Maximum estimates of swine. The packer's estimate of the 
maximum total number of swine that potentially could be delivered to 
each plant within each of the following 12 calendar months, if any or 
all of the types of expansion clauses identified in accordance with the 
requirement in paragraph (c)(4) of this section are executed. The 
estimate of maximum potential deliveries must be reported for all 
existing contracts by contract type as defined in Sec.  206.1.
    (d) What if a contract does not specify the number of swine 
committed? To meet the requirements of paragraphs (c)(3) and (c)(5) of 
this section, the packer must estimate expected and potential 
deliveries based on the best information available to the packer. Such 
information might include, for example, the producer's current and 
projected swine inventories and planned production.
    (e) When do I change previously reported estimates? Regardless of 
any estimates for a given future month that may have been previously 
reported, current estimates of deliveries reported as required by 
paragraphs (c)(3) and (c)(5) of this section must be based on the most 
accurate information available at the time each report is prepared.
    (f) Where and how do I send my monthly report? Each packer may 
submit monthly reports required by this section by either of the 
following two methods:
    (1) Electronic report. Information reported under this section may 
be reported by electronic means, to the maximum extent practicable. 
Electronic submission may be by any form of electronic transmission 
that has been determined to be acceptable to the Administrator. To 
obtain current options for acceptable methods to submit information 
electronically, contact GIPSA through the Internet on the GIPSA Web 
site (http://www.usda.gov/gipsa/) or at USDA GIPSA, Suite 317, 210 
Walnut Street, Des Moines, IA 50309.
    (2) Printed report. Each packer may deliver its printed monthly 
report to USDA GIPSA, Suite 317, 210 Walnut Street, Des Moines, IA 
50309.
    (g) What information from monthly reports will be made available to 
the public and when and how will the information be made available to 
the public?
    (1) Availability. GIPSA will provide a monthly report of estimated 
deliveries by contract types as reported by packers in accordance with 
this section, for public release on the 1st business day of each month. 
The monthly reports will be available on the Internet on the GIPSA Web 
site (http://www.usda.gov/gipsa/) and at USDA GIPSA, Suite 317, 210 
Walnut Street, Des Moines, IA 50309, during normal business hours of 7 
a.m. to 4:30 p.m. Central Time, Monday through Friday.
    (2) Regions. Information in the report will be aggregated and 
reported by geographic regions. Geographic regions will be defined in 
such a manner to provide as much information as possible while 
maintaining confidentiality in accordance with section 251 of the 
Agricultural Marketing Act (7 U.S.C. 1636) and may be modified from 
time to time.
    (3) Reported information. The monthly report will provide the 
following information:
    (i) The existing contract types for each geographic region.
    (ii) The contract types currently being made available to 
additional producers or available for renewal to currently contracted 
producers in each geographic region.
    (iii) The sum of packers' reported estimates of the total number of 
swine committed by contract for delivery during the next 6 and 12 
months beginning with the month the report is published. The report 
will indicate the number of swine committed by geographic reporting 
region and by contract type.
    (iv) The types of conditions or circumstances as reported by 
packers that could result in expansion in the numbers of swine to be 
delivered under the terms of expansion clauses in the contracts at any 
time during the following 12 calendar months.
    (v) The sum of packers' reported estimates of the maximum total 
number of swine that potentially could be delivered during each of the 
next 6 and 12 months if all expansion clauses in current contracts are 
executed. The report will indicate the sum of estimated maximum 
potential deliveries by geographic reporting region and by contract 
type.

(Approved by the Office of Management and Budget under control 
number 0580-0021)


[[Page 47829]]


    Dated: August 5, 2003.
Donna Reifschneider,
Administrator, Grain Inspection, Packers and Stockyards Administration.
[FR Doc. 03-20374 Filed 8-8-03; 8:45 am]
BILLING CODE 3410-EN-P