[Federal Register Volume 69, Number 237 (Friday, December 10, 2004)]
[Proposed Rules]
[Pages 71753-71756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27162]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV05-989-1 PR]


Raisins Produced From Grapes Grown in California; Increased 
Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule would increase the assessment rate established for 
the Raisin Administrative Committee (Committee) for the 2004-05 and 
subsequent crop years from $8.00 to $11.00 per ton of free tonnage 
raisins acquired by handlers, and reserve tonnage raisins released or 
sold to handlers for use in free tonnage outlets. The Committee locally 
administers the Federal marketing order which regulates the handling of 
raisins produced from grapes grown in California (order). Authorization 
to assess raisin handlers enables the Committee to incur expenses that 
are reasonable and necessary to administer the program. The crop year 
runs from August 1 through July 31. The 2004-05 crop is smaller than 
normal, and no volume regulation will be implemented this year. As a 
result, some expenses funded by handler assessments will increase. The 
$8.00 per ton assessment rate will not generate enough revenue to cover 
expenses. The $11.00 per ton assessment would remain in effect 
indefinitely unless modified, suspended, or terminated.

DATES: Comments must be received by December 20, 2004.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938, or e-mail: [email protected]; 
or Internet:http://www.regulations.gov. Comments should reference the 
docket number and the date and page number of this issue of the Federal 
Register and will be made available for public inspection in the Office 
of the Docket Clerk during regular business hours, or can be viewed at: 
http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Martin Engeler, Assistant Regional 
Manager, California Marketing Field

[[Page 71754]]

Office, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, 2202 Monterey Street, suite 102B, Fresno, 
California 93721; telephone: (559) 487-5901, Fax: (559) 487-5906; or 
George Kelhart, Technical Advisor, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, Fax: (202) 720-8938.
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, Fax: (202) 720-8938, or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 989 (7 CFR part 989), both as amended, 
regulating the handling of raisins produced from grapes grown in 
California, hereinafter referred to as the ``order.'' The order is 
effective under the Agricultural Marketing Agreement Act of 1937, as 
amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Under the marketing order now in effect, California 
raisin handlers are subject to assessments. Funds to administer the 
order are derived from such assessments. It is intended that the 
assessment rate as proposed herein would be applicable to all 
assessable raisins beginning on August 1, 2004, and continue until 
amended, suspended, or terminated. This rule will not preempt any State 
or local laws, regulations, or policies, unless they present an 
irreconcilable conflict with this rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. Such 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This rule would increase the assessment rate established under the 
order for the 2004-05 and subsequent crop years from $8.00 to $11.00 
per ton of free tonnage raisins acquired by handlers, and reserve 
tonnage raisins released or sold to handlers for use in free tonnage 
outlets. Authorization to assess raisin handlers enables the Committee 
to incur expenses that are reasonable and necessary to administer the 
program. The 2004-05 crop is smaller than normal, and no volume 
regulation will be implemented this year. As a result, some expenses 
funded by handler assessments will increase. The $8.00 per ton 
assessment rate will not generate enough revenue to cover expenses. 
This action was recommended by the Committee at a meeting on October 5, 
2004.
    Sections 989.79 and 989.80, respectively, of the order provide 
authority for the Committee, with the approval of USDA, to formulate an 
annual budget of expenses and collect assessments from handlers to 
administer the program. The members of the Committee are producers and 
handlers of California raisins. They are familiar with the Committee's 
needs and with the costs of goods and services in their local area and 
are thus in a position to formulate an appropriate budget and 
assessment rate. The assessment rate is formulated and discussed in a 
public meeting. Thus, all directly affected persons have an opportunity 
to participate and provide input.
    Section 989.79 also provides authority for the Committee to 
formulate an annual budget of expenses likely to be incurred during the 
crop year in connection with reserve raisins held for the account of 
the Committee. A certain percentage of each year's raisin crop may be 
held in a reserve pool during years when volume regulation is 
implemented to help stabilize raisin supplies and prices. The remaining 
``free'' percentage may be sold by handlers to any market. Reserve 
raisins are disposed of through various programs authorized under the 
order. Reserve pool expenses are deducted from proceeds obtained from 
the sale of reserve raisins. Net proceeds are returned to the pool's 
equity holders, primarily producers.
    When volume regulation is in effect, an administrative budget 
funded by handler assessments is developed, and a reserve pool budget 
funded by the current year's reserve pool is developed. Committee costs 
are apportioned between the two revenue sources. When volume regulation 
is not implemented, the Committee develops an administrative budget 
funded solely from handler assessments.
    When the Committee met on August 12, 2004, it recommended two 
budget scenarios for the 2004-2005 crop year to accommodate both 
situations, because it was not known at that time if volume regulation 
would be implemented. At that time, it appeared the crop may be short, 
but the initial crop estimate would not be available until a later 
date.
    The first budget scenario recommended was premised on the 
assumption that volume regulation would be implemented. Under this 
scenario, the Committee recommended an administrative budget of 
expenses totaling $2,200,000 and a reserve pool budget of $2,839,225. 
The assessment rate would remain unchanged at $8.00 per ton. This 
assessment rate applied to estimated acquisitions of raisins by 
handlers of 275,000 tons would provide adequate revenue to fund the 
administrative budget.
    The second budget scenario recommended was based on the premise 
that volume regulation would not be implemented for the 2004-05 season. 
Under this scenario, various expenses typically split between the 
reserve pool budget and the administrative budget would be funded by 
the administrative budget. In addition, some expense categories would 
be eliminated, some reduced, and another would be allocated to the 
existing 2003-04 reserve pool budget. The administrative budget would 
increase to $3,025,000, thus necessitating an increase in the 
assessment rate to $11.00 per ton.
    The Committee met on October 5, 2004, and determined that no volume 
regulation for the 2004-05 crop year was warranted because of a short 
crop. The crop estimate for Natural (sun-dried) Seedless raisins, the 
major raisin variety produced, was 199,344 tons. If realized, this 
would be the smallest crop in over 20 years. Production of other 
varietal types was also estimated to be relatively low. The lack of 
volume regulation triggered implementation of the Committee's 
recommendation for an administrative budget of $3,025,000 and an 
increased assessment rate from $8.00 per ton to $11.00 per ton.
    In developing this budget, the Committee reviewed and identified 
those expenses that were considered reasonable and necessary to 
continue operation of the raisin marketing order

[[Page 71755]]

program. Several costs normally associated with administering a reserve 
pool would be eliminated, such as insurance coverage ($400,000), costs 
for repairing reserve storage bins ($300,000), raisin hauling costs 
($65,000), auditing fees ($20,000), and bank charges ($20,000). Other 
costs usually split between the administrative and reserve pool budgets 
would also be eliminated, such as production of industry brochures 
($20,000) and research and communication activities ($70,000). It was 
determined that these activities, while desirable, could be eliminated 
without adversely impacting Committee operations.
    Other expenses traditionally split between the reserve and 
administrative budgets would be reduced. For example, total compliance 
activity costs budgeted at $500,000 ($250,000 allocated to the reserve 
budget and $250,000 allocated to the administrative budget) would be 
reduced to $320,000, to be funded from the administrative budget. 
Purchase of equipment would also be reduced, from a combined amount of 
$50,000, to $25,000 funded from the administrative budget.
    Other costs usually split between the reserve pool and 
administrative budgets that would be funded by the administrative 
budget include general overhead costs such as salaries, taxes, 
retirement and other benefits, insurance, rent, office supplies, and 
Committee travel. These costs remain the same regardless of whether 
there is a reserve pool, as they are necessary to continue 
administration of the program. Finally, $836,000 in costs associated 
with administering export programs would be funded by the existing 
2003-04 reserve pool budget, and $536,000 would be funded under 
administrative budget for 2004-05.
    A direct comparison of expenses between the recommended 2004-05 
budget and the 2003-04 budget is difficult because the 2004-05 budget 
is only administrative, whereas in 2003-04 there was an administrative 
and a reserve pool budget. In total, the 2004-05 recommended 
administrative budget of $3,025,000 compares to the 2003-04 
administrative budget of $2,000,000. However, the $3,025,000 
administrative budget is $1,609,800 less than the combined 2003-04 
administrative and reserve pool budgets of $4,634,800.
    Major expense categories include $1,000,000 for salaries, $536,000 
for export program activities (administrative budget only), $320,000 
for compliance activities, $150,000 for group health insurance, 
$110,000 for rent, $120,000 for Committee member and staff travel, and 
$110,000 for computer software and programming.
    A continuous assessment rate of $8.00 per ton has been in effect 
since the 2002-03 crop year. For the 2004-05 crop year, the Committee 
recommended increasing the assessment rate to $11.00 per ton of 
assessable raisins to cover recommended administrative expenditures of 
$3,025,000. The recommended $11.00 per ton assessment rate was derived 
by dividing the $3,025,000 in anticipated expenses by an estimated 
275,000 tons of assessable raisins. Sufficient income should be 
generated at the higher assessment rate for the Committee to meet its 
anticipated expenses. Pursuant to Sec.  989.81(a) of the order, any 
unexpended assessment funds from the crop year must be credited or 
refunded to the handlers from whom collected.
    The proposed assessment rate would continue in effect indefinitely 
unless modified, suspended, or terminated by USDA upon recommendation 
and other information submitted by the Committee or other available 
information.
    Although this assessment rate would be in effect for an indefinite 
period, the Committee would continue to meet prior to or during each 
crop year to recommend a budget of expenses and consider 
recommendations for modification of the assessment rate. The dates and 
times of Committee meetings are available from the Committee or USDA. 
Committee meetings are open to the public and interested persons may 
express their views at these meetings. USDA would evaluate Committee 
recommendations and other available information to determine whether 
modification of the assessment rate is needed. Further rulemaking would 
be undertaken as necessary. The Committee's 2004-05 budget and those 
for subsequent crop years would be reviewed and, as appropriate, 
approved by USDA.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this initial regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 20 handlers of California raisins who are 
subject to regulation under the order and approximately 4,500 raisin 
producers in the regulated area. Small agricultural firms are defined 
by the Small Business Administration (13 CFR 121.201) as those having 
annual receipts of less that $5,000,000, and small agricultural 
producers are defined as those having annual receipts of less than 
$750,000. Thirteen of the 20 handlers subject to regulation have annual 
sales estimated to be at least $5,000,000, and the remaining 7 handlers 
have sales less than $5,000,000. No more than 7 handlers, and a 
majority of producers, of California raisins may be classified as small 
entities.
    This rule would increase the assessment rate established for the 
Committee and collected from handlers for the 2004-05 and subsequent 
crop years from $8.00 to $11.00 per ton of assessable raisins acquired 
by handlers. The 2004-05 crop is estimated to be smaller than normal, 
and as a result, the Committee determined that volume regulation for 
the season was not warranted.
    When volume regulation is in effect, the Committee establishes two 
budgets; one for administrative expenses funded by handler assessments, 
and one for expenses incurred in connection with a reserve pool. Many 
of the Committee costs are split between the reserve pool budget and 
the administrative budget.
    When no volume regulation is in effect during a crop year, there is 
no reserve pool budget for that crop year. However, the Committee 
continues to incur fixed costs associated with administering the 
marketing order program. Therefore, the Committee reviewed and 
identified the expenses that would be reasonable and necessary to 
continue program operations without a reserve pool in effect during the 
2004-05 crop year. Operating expenses typically split between the 
administrative and reserve pool budgets were allocated to the 
administrative budget, some expenses were reduced, some expenses were 
eliminated, and some export program activity expenses were allocated to 
the existing 2003-04 reserve pool budget.
    The resulting administrative budget recommended includes expenses 
totaling $3,025,000 for the 2004-05 crop year. While this is an 
increase from the 2003-04 administrative budget of $2,000,000, it 
represents a decrease in the 2003-04 combined administrative

[[Page 71756]]

and reserve pool budgets which totaled $4,634,800.
    Because the 2004-05 administrative budget funded some of the costs 
typically allocated to a reserve budget, a direct comparison to 2003-04 
administrative costs would be difficult. A comparison of 2004-05 
recommended administrative expenditures to combined 2003-04 
administrative and reserve pool budget expenditures therefore follows: 
2004-05 salaries, $1,000,000 (2003-04 combined budgeted expenditures 
for salaries was $1,000,000); $456,000 for export program activities, 
($1,246,000); $320,000 for compliance activities, ($320,000); $150,000 
for group health insurance, ($165,000); $110,000 for rent, ($106,000); 
$120,000 for Committee member and staff travel, ($120,000); and 
$110,000 for computer software and programming, ($107,800).
    With anticipated assessable tonnage at 275,000 tons, sufficient 
income should be generated at the $11.00 per ton assessment rate to 
meet expenses. Pursuant to Sec.  989.81(a) of the order, any unexpended 
assessment funds from the crop year must be credited or refunded to the 
handlers from whom collected.
    The industry considered an alternative assessment rate and budget 
prior to arriving at the $11.00 per ton and $3,025,000 administrative 
budget recommendation. The Committee's Audit Subcommittee met on July 
1, 2004, to review preliminary budget information. The subcommittee was 
aware that the 2004-05 crop may be short and no volume regulation may 
be implemented. The subcommittee thus developed two budgets and 
assessment rates to accommodate a scenario with volume regulation and 
another scenario with no volume regulation. If volume regulation was to 
be implemented, the assessment rate would remain at $8.00 per ton. If 
volume regulation was not implemented, costs typically allocated to a 
reserve pool budget would be absorbed by the administrative budget, 
thus necessitating an increased assessment rate to $11.00 per ton. The 
Committee approved these budget and assessment recommendations on 
August 12, 2004.
    The Committee met again on October 5, 2004, and determined that 
volume regulation was not warranted for the season. This triggered 
implementation of the Committee's recommendation for an administrative 
budget of $3,025,000 and assessment rate of $11.00 per ton.
    A review of statistical data on the California raisin industry 
indicates that assessment revenue has consistently been less than one 
percent of grower revenue in recent years. A grower price of a minimum 
of $1,210 per ton for the 2004-05 crop raisins has been announced by 
the Raisin Bargaining Association. If this price is realized, 
assessment revenue would continue to be less than one percent of grower 
revenue in the 2004-05 crop year, even with the increased assessment 
rate.
    Regarding the impact of this action on affected entities, this 
action would increase the assessment obligation imposed on handlers. 
While assessments impose some additional costs on handlers, the costs 
are minimal and uniform on all handlers. Some of the additional costs 
may be passed on to producers. However, these costs would be offset by 
the benefits derived by the operation of the marketing order.
    Additionally, the Audit Subcommittee and full Committee meetings 
held on July 1, 2004, and August 12, 2004, respectively, where this 
action was deliberated were public meetings widely publicized 
throughout the California raisin industry. All interested persons were 
invited to attend the meetings and participate in the industry's 
deliberations. Finally, all interested persons are invited to submit 
information on the regulatory and informational impacts of this action 
on small businesses.
    This proposed rule would impose no additional reporting or 
recordkeeping requirements on either small or large raisin handlers. As 
with all Federal marketing order programs, reports and forms are 
periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies. Finally, USDA has 
not identified any relevant Federal rules that duplicate, overlap, or 
conflict with this rule.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance 
guide should be sent to Jay Guerber at the previously mentioned address 
in the FOR FURTHER INFORMATION CONTACT section.
    A 10-day comment period is provided to allow interested persons to 
respond to this proposed rule. Ten days is deemed appropriate because a 
final decision on increasing the rate as proposed should be made as 
soon as possible so the Committee can begin billing handlers for 
assessments at the higher rate. The Committee usually begins assessment 
billings in November.

List of Subjects in 7 CFR Part 989

    Grapes, Marketing agreements, Raisins, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble, 7 CFR part 989 is 
proposed to be amended as follows:

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 989 continues to read as 
follows:

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

    2. Section 989.347 is revised to read as follows:


Sec.  989.347  Assessment rate.

    On and after August 1, 2004, an assessment rate of $11.00 per ton 
is established for assessable raisins produced from grapes grown in 
California.

    Dated: December 7, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-27162 Filed 12-9-04; 8:45 am]
BILLING CODE 3410-02-P