[Federal Register Volume 70, Number 32 (Thursday, February 17, 2005)]
[Proposed Rules]
[Pages 8043-8048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-3070]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1033

[Docket No. AO-166-A72; DA-05-01]


Milk in the Mideast Marketing Area; Notice of Hearing on Proposed 
Amendments to Tentative Marketing Agreement and Order

AGENCY: Agricultural Marketing Service, USDA.

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

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SUMMARY: A public hearing is being held to consider proposals that 
would amend certain provisions of the Mideast Federal milk marketing 
order. Proposals under consideration address: Eliminating the ability 
of the same milk to be simultaneously pooled on the Mideast order and 
on a State operated order with marketwide pooling; Changing the supply 
plant performance standards and diversion limits; Increasing the number 
of days a dairy farmer's milk production must be delivered to a pool 
plant for the milk of the dairy farmer to be eligible for diversion; 
Limiting the pooling of producer milk that was not pooled in a prior 
month(s); Establishing a ``dairy farmer for other markets'' provision; 
Establishing a transportation credit for milk; and Changing the 
producer-handler definition.

DATES: The hearing will convene at 8:30 a.m. on Monday, March 7, 2005.

ADDRESSES: The hearing will be held at the Shisler Conference Center, 
Ohio Agricultural Research and Development Center, 1625 Wilson Road, 
Wooster, Ohio 44691, (330) 287-1424. Hotel accommodations can be made 
at the Hilton Garden Inn Wooster, 959 Dover Road, Wooster, Ohio 44691, 
(330) 202-7701.

FOR FURTHER INFORMATION CONTACT: Gino Tosi, Marketing Specialist, Order 
Formulation and Enforcement Branch, USDA/AMS/Dairy Programs, Stop 
0231--Room 2971, 1400 Independence Avenue, SW., Washington, DC 20250-
0231, (202) 690-1366, e-mail address: [email protected].
    Persons requiring a sign language interpreter or other special 
accommodations should contact Paul Huber at 330-225-4758 or via e-mail 
at [email protected] before the hearing begins.

SUPPLEMENTARY INFORMATION: This administrative action is governed by 
the provisions of sections 556 and 557 of Title 5 of the United States 
Code and,

[[Page 8044]]

therefore, is excluded from the requirements of Executive Order 12866.
    Notice is hereby given of a public hearing to be held at the 
Shisler Conference Center, Ohio Agricultural Research and Development 
Center, 1625 Wilson Road, Wooster, Ohio 44691, (330) 287-1424, 
beginning at 8:30 a.m., on Monday, March 7, 2005, with respect to 
proposed amendments to the tentative marketing agreement and to the 
order regulating the handling of milk in the Mideast milk marketing 
area.
    The hearing is called pursuant to the provisions of the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), and the applicable rules of practice and procedure governing the 
formulation of marketing agreements and marketing orders (7 CFR Part 
900).
    The purpose of the hearing is to receive evidence with respect to 
the economic and marketing conditions that relate to the proposed 
amendments, hereinafter set forth, and any appropriate modifications 
thereof, to the tentative marketing agreement and to the order.
    Actions under the Federal milk order program are subject to the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). This Act seeks to 
ensure that, within the statutory authority of a program, the 
regulatory and informational requirements are tailored to the size and 
nature of small businesses. For the purpose of the Act, a dairy farm is 
a ``small business'' if it has an annual gross revenue of less than 
$750,000, and a dairy products manufacturer is a ``small business'' if 
it has fewer than 500 employees. Most parties subject to a milk order 
are considered as a small business. Accordingly, interested parties are 
invited to present evidence on the probable regulatory and 
informational impact of the hearing proposals on small businesses. 
Also, parties may suggest modifications of these proposals for the 
purpose of tailoring their applicability to small businesses.
    The amendments to the rules proposed herein have been reviewed 
under Executive Order 12988, Civil Justice Reform. They are not 
intended to have a retroactive effect. If adopted, the proposed 
amendments would not preempt any state or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Agricultural Marketing Agreement Act provides that 
administrative proceedings must be exhausted before parties may file 
suit in court. Under section 8c(15)(A) of the Act, any handler subject 
to an order may request modification or exemption from such order by 
filing with the Department of Agriculture (Department) a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with the law. 
A handler is afforded the opportunity for a hearing on the petition. 
After a hearing, the Department would rule on the petition. The Act 
provides that the district court of the United States in any district 
in which the handler is an inhabitant, or has its principal place of 
business, has jurisdiction in equity to review the Department's ruling 
on the petition, provided a bill in equity is filed not later than 20 
days after the date of the entry of the ruling.
    This public hearing is being conducted to collect evidence for the 
record concerning the inequities among producers arising from order 
provisions that allow reserve milk, which is used in cheese or butter 
and nonfat dry milk production, to share in the benefits of pooling, 
but does not require such milk to pool when there is a cost (when the 
Class III price or Class IV price is above the blend price). Evidence 
will also be collected to consider amending the order's supply plant 
performance standards and diversion limitations to better identify the 
milk of producers that should be eligible to receive the order's blend 
price, increasing the number of days that a dairy farmer's milk 
production would need to be delivered to a pool plant before such milk 
would be eligible for diversion to nonpool plants but have such 
diverted milk pooled on the order, establishing a transportation credit 
to partially reimburse handlers for the cost of transporting milk 
intended for use in Class I products, eliminating the ability to 
simultaneously pool the same milk on the Mideast Federal order and on a 
State operated order with marketwide pooling, and changing the 
producer-handler definition for the order.
    Interested parties who wish to introduce exhibits should provide 
the Presiding Officer at the hearing with (4) copies of such exhibits 
for the Official Record. Also, it would be helpful if additional copies 
are available for the use of other participants at the hearing.

List of Subjects in 7 CFR Part 1033

    Milk marketing orders.

    The authority citation for 7 CFR Part 1033 continues to read as 
follows:

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

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

Proposed by Dairy Farmers of America, Inc., and Michigan Milk Producers 
Association

Proposal No. 1

    This proposal seeks to eliminate the ability of the same milk to be 
pooled on the Mideast order and on a State operated order with 
marketwide pooling.
    1. Amend Sec.  1033.13 by adding a new paragraph (e), to read as 
follows:


Sec.  1033.13  Producer milk.

* * * * *
    (e) Producer milk shall not include milk of a producer that is 
subject to a marketwide equalization pool under a milk classification 
and pricing plan under the authority of a State government.

Proposed by Dairy Farmers of America, Inc., and Michigan Milk Producers 
Association

Proposal No. 2

    This proposal seeks to amend the order's pooling provisions by 
changing the supply plant and the cooperative association operated 
plant performance standards and diversion limit standards to better 
identify the milk of producers who are providing consistent service to 
the Class I needs of the Mideast milk marketing order.
    1. Amend Sec.  1033.7 by revising paragraphs (c), (d) introductory 
text, (d)(2) and (e)(1), to read as follows:


Sec.  1033.7  Pool Plant.

* * * * *
    (c) A supply plant from which the quantity of bulk fluid milk 
products shipped to, received at, and physically unloaded into plants 
described in paragraph (a) or (b) of this section as a percent of the 
Grade A milk received at the plant from dairy farmers (except dairy 
farmers described in Sec.  1033.12(b)) and handlers described in Sec.  
1000.9(c), as reported in Sec.  1033.30(a), is not less than 40 percent 
of the milk received from dairy farmers, including milk diverted 
pursuant to Sec.  1033.13, subject to the following conditions:
* * * * *
    (d) A plant operated by a cooperative association if, during the 
months of August through November 40 percent and during the months of 
December through July 30 percent or more of the producer milk of 
members of the association is delivered to a distributing pool plant(s) 
or to a nonpool plant(s), and classification other than Class I is not 
requested. Deliveries for qualification purposes may be made directly 
from the farm or by transfer

[[Page 8045]]

from such association's plant, subject to the following conditions:
    (1) * * *
    (2) The 30 percent delivery requirement for December through July 
may be met for the current month or it may be met on the basis of 
deliveries during the preceding twelve (12) month period ending with 
the current month.
* * * * *
    (e) * * *
    (1) The aggregate monthly quantity supplied by all parties to such 
an agreement as a percentage of the producer milk receipts included in 
the unit during the months of August through November is not less than 
45 percent and during the months of December through July is not less 
than 35 percent; and
* * * * *
    2. Amend Sec.  1033.13 by revising paragraph (d)(4), to read as 
follows:


Sec.  1033.13  Producer milk.

* * * * *
    (d) * * *
    (4) Of the total quantity of producer milk received during the 
month (including diversions but excluding the quantity of producer milk 
received from a handler described in Sec.  1000.9(c) or which is 
diverted to another pool plant), the handler diverted to nonpool plants 
not more than 50 percent in each of the months of August through 
February and 60 percent in each of the months of March through July.
* * * * *

Proposed by Dean Foods Company

Proposal No. 3

    This proposal seeks to amend the ``touch-base'' standard and 
provide an exact definition for temporary loss of Grade A approval.
    1. Amend Sec.  1033.13 by revising paragraphs (d)(1) through 
(d)(3), to read as follows:


Sec.  1033.13  Producer milk.

* * * * *
    (d) * * *
    (1) Milk of a dairy farmer shall not be eligible for diversion 
until milk of such dairy farmer has been physically received as 
producer milk at a pool plant and the dairy farmer has continuously 
retained producer status since that time. If a dairy farmer loses 
producer status under the order in this part (except as a result of 
loss of Grade A approval not to exceed 21 days in a calendar year, 
unless it is determined by the market administrator to be unavoidable 
circumstances beyond the control of the dairy farmer such as a natural 
disaster (ice storm, wind storm, flood)) the dairy farmer's milk shall 
not be eligible for diversion until milk of the dairy farmer has been 
physically received as producer milk at a pool plant;
    (2) The equivalent of at least four days milk production in each of 
the months of August through November and two days milk production in 
each of the months of December through January is caused by the handler 
to be physically received at the pool plant;
    (3) The equivalent of at least two days milk production is caused 
by the handler to be physically received at a pool plant in each of the 
months of February through July if the requirement of paragraph (d)(2) 
of this section (Sec.  1033.13) in each of the prior months of August 
through January are not met, except in the case of a dairy farmer who 
marketed no Grade A milk during each of the prior months of August 
through January.
* * * * *

Proposed by Ohio Dairy Producers and the Ohio Farmers Union

Proposal No. 4

    This proposal seeks to establish a dairy farmer for other markets 
provision that would encourage a year-round pooling commitment and 
specify conditions for milk that was depooled to be repooled.
    1. Amend Sec.  1033.12 by adding a new paragraph (b)(5), to read as 
follows:


Sec.  1033.12  Producer.

* * * * *
    (b) * * *
    (5) For any month, any dairy farmer whose milk is received at a 
pool plant or by a cooperative association handler described in Sec.  
1000.9(c) if the pool plant operator or the cooperative association 
caused milk from the same farm to be delivered to any plant as other 
than producer milk, as defined in the order in this part or any other 
Federal milk order, during the same month or any of the preceding 11 
months, unless the equivalent of at least ten days milk production has 
been physically received otherwise as producer milk at a distributing 
plant during the month.

Proposed by Continental Dairy Products, Inc.

Proposal No. 5

    This proposal seeks to limit the ability to pool the milk of a 
producer on the order during the month if such milk had not been pooled 
for at least twelve consecutive prior months.
    1. Amend Sec.  1033.13 by revising the introductory paragraph and 
adding a new paragraph (e), to read as follows:


Sec.  1033.13  Producer milk.

    Except as provided in paragraph (e) of this section, producer milk 
means the skim milk (or the skim equivalent of components of skim 
milk), including nonfat components, and butterfat in milk of a producer 
that is:
* * * * *
    (e) Producer milk shall not include any milk which comes from a 
dairy farm whose milk was not producer milk under the provisions of 
this part during the previous twelve (12) months or Sec.  --------.13 
of any other Federal milk marketing order. This exception shall not 
apply if
    (1) Milk was not marketed from that farm during the previous 12 
months in which case all milk that it did market for what ever part of 
the preceding 12 months must have been producer milk.
    (2) Milk was not marketed from that farm because the Grade A milk 
producers permit was suspended during some of the period and the 
producer did not market milk under any other grade of milk permit.
    (3) Milk from the farm has not been producer milk for at least 12 
consecutive months.

Proposed by Ohio Dairy Producers and the Ohio Farmers Union

Proposal No. 6

    This proposal seeks to establish a dairy farmer for other markets 
provision that would establish a maximum pooling limit of 115 percent 
of a prior month's pooled milk volume that could be pooled in any 
subsequent month.
    1. Amend Sec.  1033.13 by adding a new paragraph (e), to read as 
follows:


Sec.  1033.13  Producer milk.

* * * * *
    (e) The quantity of milk reported by a handler pursuant to Sec.  
1033.30(a)(1) and/or Sec.  1033.30(c)(1) may not exceed 115 percent of 
the producer milk receipts pooled by the handler during the prior 
month. Milk diverted to nonpool plants reported in excess of this limit 
shall be removed from the pool by the market administrator. Milk 
received at pool plants, other than pool distributing plants, shall be 
classified pursuant to Sec.  1000.44(a)(3)(v) and Sec.  
1000.44(b)(3)(v). The handler must designate, by producer pick-up, 
which milk is to be removed from the pool. If the handler fails to 
provide this information, the market administrator will make the 
determination. The following provisions will apply:
    (1) Milk shipped to and physically received at pool distributing 
plants shall not be subject to the 115 percent limitation;

[[Page 8046]]

    (2) Producer milk qualified pursuant to Sec.  ------.13 of any 
other Federal order and continuously pooled in any Federal order for 
the previous six months shall not be included in the computation of the 
115 percent limitation;
    (3) The market administrator may waive the 115 percent limitation 
utilizing;
    (i) For a new handler on the order, subject to the provision of 
Sec.  1033.13(e)(3), or
    (ii) For an existing handler with significantly changed milk supply 
conditions due to unusual circumstances;
    (4) The market administrator may increase or decrease the 
applicable limitation for a month consistent with the procedures in 
Sec.  1033.7(g); and
    (5) A bloc of milk may be considered ineligible for pooling if the 
market administrator determines that handlers altered the reporting of 
such milk for the purpose of evading the provisions of this paragraph.

Proposed by Dairy Farmers of America, Inc., and Michigan Milk Producers 
Association

Proposal No. 7

    This proposal, like Proposal 6, seeks to establish a dairy farmer 
for other markets provision that would establish a maximum pooling 
limit of 115 percent of a prior month's pooled milk volume that could 
be pooled in a subsequent month. It has minor order language 
differences from Proposal 6.
    1. Amend Sec.  1033.13 by adding a new paragraph (e), to read as 
follows:


Sec.  1033.13  Producer milk.

* * * * *
    (e) The quantity of milk reported by a handler pursuant to Sec.  
1033.30(a)(1) and/or Sec.  1033.30(c)(1) for the current month may not 
exceed 115 percent of the producer milk receipts pooled by the handler 
during the prior month. Milk diverted to nonpool plants reported in 
excess of this limit shall not be producer milk. Milk received at pool 
plants in excess of the 115 percent limit, other than pool distributing 
plants, shall be classified pursuant to Sec.  1000.44(a)(3)(v). The 
handler must designate, by producer pick-up, which milk shall not be 
producer milk. If the handler fails to provide this information the 
provisions of Sec.  1033.13(d)(6) shall apply. The following provisions 
apply:
    (1) Milk shipped to and physically received at pool distributing 
plants and allocated to Class I use in excess of the prior month's 
volume allocated to Class I use shall not be subject to the 115 percent 
limitation;
    (2) Producer milk qualified pursuant to Sec.  ------.13 of any 
other Federal order in the previous month shall not be included in the 
computation of the 115 percent limitation, provided that the producers 
comprising the milk supply have been continuously pooled on any Federal 
order for the entirety of the most recent three consecutive months.
    (3) The market administrator may waive the 115 percent limitation:
    (i) For a new handler on the order, subject to the provisions of 
Sec.  1033.13(e)(4), or
    (ii) For an existing handler with significantly changed milk supply 
conditions due to unusual circumstances;
    (4) Milk may be considered ineligible for pooling if the market 
administrator determines that handlers altered the reporting of such 
milk for the purpose of evading the provisions of this paragraph.

Proposed by Dean Foods Company

Proposal No. 8

    This proposal seeks to establish a dairy farmer for other markets 
provision that would specify a 2-month to 7-month exclusion from the 
pool if milk is depooled.
    1. Amend Sec.  1033.12 by adding new paragraphs (b)(5) and (b)(6), 
to read as follows:


Sec.  1033.12  Producer.

* * * * *
    (b) * * *
    (5) For any month of February through June, any dairy farmer whose 
milk is received at a pool plant or by a cooperative association 
handler described in Sec.  1000.9(c) if the pool plant operator or the 
cooperative association caused milk from the same farm to be delivered 
to any plant as other than producer milk, as defined under the order in 
this part or any other Federal milk order, during the month, any of the 
3 preceding months, or during any of the preceding months of July 
through January, unless the equivalent of at least ten days' milk 
production has been physically received otherwise as producer milk at a 
pool distributing plant during the month; and
    (6) For any month of July through January, any dairy farmer whose 
milk is received at a pool plant or by a cooperative association 
handler described in Sec.  1000.9(c) if the pool plant operator or the 
cooperative association caused milk from the same farm to be delivered 
to any plant as other than producer milk, as defined under the order in 
this part or any other Federal milk order, during the month or the 
preceding month unless the equivalent of at least ten days' milk 
production has been physically received otherwise as producer milk at a 
pool distributing plant during the month.

Proposed by Dairy Farmers of America, Inc.

Proposal No. 9

    This proposal seeks to establish a transportation credit provision 
on milk delivered from farms to pool distributing plants. The initial 
75 miles and that portion of the milk movement beyond 400 miles would 
not be eligible for the credit.
    1. Add a new Sec.  1033.55, to read as follows:


Sec.  1033.55  Transportation credits.

    (a) Each handler operating a pool distributing plant described in 
Sec.  1033.7(a) or (b) that receives milk from dairy farmers, and each 
handler described in Sec.  1033.9(c) that delivers milk to a pool 
distributing plant described in Sec.  1033.7(a) or (b) shall receive a 
transportation credit on the portion of such milk eligible for the 
credit pursuant to paragraph (b) of this section.
    (1) Transportation credits paid pursuant to paragraph (a)(1) and 
(2) of this section shall be subject to final verification by the 
market administrator pursuant to Sec.  1000.77.
    (2) In the event that a qualified cooperative association is the 
responsible party for whose account such milk is received and written 
documentation of this fact is provided to the market administrator 
pursuant to Sec.  1033.30(c)(3) prior to the date payment is due, the 
transportation credits for such milk computed pursuant to this section 
shall be made to such cooperative association rather than to the 
operator of the pool plant at which the milk was received.
    (b) Transportation credits shall apply to the pounds of bulk milk 
received directly from the farms of producers at pool distributing 
plants determined as follows:
    (1) Determine the total pounds of producer milk physically received 
at the pool distributing plant;
    (2) Subtract from the pounds of milk described in paragraph (b)(1) 
of this section the pounds of bulk milk transferred or diverted from 
the pool plant receiving the milk if milk was transferred or diverted 
to a nonpool plant on the same calendar day that the milk was received. 
For this purpose, the transferred or diverted milk shall be subtracted 
from the most distant load of milk received, and then in sequence

[[Page 8047]]

with the next most distant load until all of the transfers have been 
offset; and
    (3) Multiply the pounds determined in (b)(2) by the Class I 
utilization of all producer milk at the pool plant operator as 
described in Sec.  1000.44. The resulting pounds are the pounds upon 
which transportation credits, as determined in paragraph (c) of this 
section, shall be applicable.
    (c) Transportation credits shall be computed as follows:
    (1) Determine an origination point for each load of milk by 
locating the county seat of the closest producer's farm from which milk 
was picked up for delivery to the receiving pool plant;
    (2) Determine the shortest hard-surface highway distance between 
the receiving pool plant and the origination point;
    (3) Subtract 75 miles from the lesser of the mileage so determined 
in paragraph (c)(2) or 400 miles;
    (5) Multiply the remaining miles so computed by 0.4 cent ($0.004);
    (6) Subtract the Class I differential specified in Sec.  1000.52 
applicable for the county in which the origination point is located 
from the Class I differential applicable at the receiving pool plant's 
location;
    (7) Subtract any positive difference computed in paragraph (c)(6) 
of this section from the amount computed in paragraph (c)(5) of this 
section; and
    (8) Multiply any positive remainder computed in paragraph (c)(7) by 
the hundredweight of milk described is paragraph (b)(3) of this 
section.
    (d) The rate and mileage limits of paragraphs (c)(4) and (5) of 
this section may be increased or decreased by the market administrator 
if the market administrator finds that such adjustment is necessary to 
better reflect actual conditions present in the marketplace. Before 
making such a finding, the market administrator shall investigate the 
need for adjustment either on the market administrator's own initiative 
or at the request of interested parties. If the investigation shows 
that an adjustment might be appropriate, the market administrator shall 
issue a notice stating that an adjustment is being considered and 
invite data, views, and arguments. Any decision to revise either figure 
must be issued in writing at least one day before the effective date.
    (e) For purposes of this section, the distances to be computed 
shall be determined by the market administrator using the shortest 
available state and/or Federal highway mileage. Mileage determinations 
are subject to redetermination at all times. In the event a handler 
requests a redetermination of the mileage pertaining to any plant, the 
market administrator shall notify the handler of such redetermination 
within 30 days after the receipt of such request. Any financial 
obligation resulting from a change in mileage shall not be retroactive 
for any periods prior to the redetermination by the market 
administrator.
    2. Amend Sec.  1033.60 by revising the introductory paragraph and 
adding a new paragraph (k), to read as follows:


Sec.  1033.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (i) of this section and subtracting 
from that total amount the value computed in paragraphs (j) and (k) of 
this section. Unless otherwise specified, the skim milk, butterfat, and 
the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec.  1000.44(a), (b), 
and (c), respectively, and the nonfat components of producer milk in 
each class shall be based upon the proportion of such components in 
producer skim milk. Receipts of nonfluid milk products that are 
distributed as labeled reconstituted milk for which payments are made 
to the producer-settlement fund of another Federal order under Sec.  
1000.76(a)(4) or (d) shall be excluded from pricing under this section.
* * * * *
    (k) Compute the amount of credits applicable pursuant to Sec.  
1033.55.

Proposed by Dairy Farmers of America, Inc., and Michigan Milk Producers 
Association

Proposal No. 10

    This proposal seeks to amend the current producer-handler 
definition.
    1. Revise Sec.  1033.10, to read as follows:


Sec.  1033.10  Producer-handler.

    Producer-handler means a person who operates a dairy farm(s) and a 
distributing plant(s) from which there is route disposition in the 
marketing area and the total route disposition and transfers in the 
form of packaged fluid milk products to other distributing plants 
during the month does not exceed 3 million pounds (or such lesser 
maximum volume that the record may so establish) and who provides proof 
satisfactory to the market administrator that it meets all the 
requirements of this section for designation.
    (a) Requirements for designation. Designation of any person as a 
producer-handler by the market administrator shall be contingent upon 
meeting all the conditions set forth in paragraphs (a)(1) through (6) 
of this section. Following the cancellation of a previous producer-
handler designation, a person seeking to have their producer-handler 
designation reinstated must demonstrate that these conditions have been 
met for the preceding month.
    (1) The care and management of the dairy animals and other 
resources and facilities designated in paragraph (b)(1) of this section 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) are under the 
complete and exclusive control, and management of the producer-handler 
and are operated as the producer-handler's own enterprise and its sole 
risk.
    (2) The plant operation designated in paragraph (b)(2) of this 
section at which the producer-handler processes and packages, and from 
which it distributes, its own milk production is under the complete and 
exclusive control, and management of the producer-handler and is 
operated as the producer-handler's own enterprise and at its sole risk.
    (3) The producer-handler neither receives at its designated milk 
production resources and facilities, nor receives, handles, processes, 
or distributes at or through any of its designated milk handling, 
processing, or distributing resources and facilities other source milk 
products for reconstitution into fluid milk products or fluid milk 
derived from any source other than:
    (i) Its designated milk production resources and facilities (own 
farm production);
    (ii) Pool handlers and plants regulated under any Federal order 
within the limitation specified in paragraph (c)(2) of this section; or
    (iii) Nonfat milk solids which are used to fortify fluid milk 
products.
    (4) The producer-handler is neither directly nor indirectly 
associated with the business control or management of, nor has a 
financial interest in, another handler's operation; nor is any other 
handler so associated with the producer-handler's operation.
    (5) No milk produced by the herd(s) or on the farm(s) that supply 
milk to the producer-handler's plant operation is:
    (i) Subject to inclusion and participation in a marketwide

[[Page 8048]]

equalization pool under a milk classification and pricing program under 
the authority of a State government maintaining marketwide pooling of 
returns, or
    (ii) Marketed in any part to a nonpool distributing plant.
    (6) The producer-handler does not distribute fluid milk products to 
a wholesale customer who is served by a plant described in Sec.  
1033.7(a) and (b) or a handler described in Sec.  1000.8(c) that 
supplied the same product in the same-sized package with a similar 
label to a wholesale customer during the month.
    (b) Designation of resources and facilities. Designation of a 
person as a producer-handler shall include the determination of what 
shall constitute the person's milk production, handling, processing, 
and distribution resources and facilities, all of which shall be 
considered an integrated operation.
    (1) Milk production resources and facilities shall include all 
resources and facilities (milking herd(s), buildings housing such 
herd(s), and the land on which such buildings are located) used for the 
production of milk which the producer-handler has designated as a 
source of milk supply for the producer-handler's plant operation.
    (2) Milk handling, processing, and distribution resources and 
facilities shall include all resources and facilities (including store 
outlets) used for handling, processing, and distributing fluid milk 
products which are solely or partially owned by, and directly or 
indirectly operated or controlled by the producer-handler or in which 
the producer-handler in any way has an interest, including any 
contractual arrangement, or over which the producer-handler directly or 
indirectly exercises any degree of management or control.
    (3) All designations shall remain in effect until canceled pursuant 
to paragraph (c) of this section.
    (c) Cancellation. The designation as a producer-handler shall be 
canceled upon determination by the market administrator that any of the 
requirements of paragraph (a)(1) through (6) of this section are not 
met, or under any of the conditions described in paragraph (c)(1), (2) 
or (3) of this section. Cancellation of a producer-handler's status 
pursuant to this paragraph shall be effective on the first day of the 
month in which the conditions were not met.
    (1) Milk from the milk production resources and facilities of the 
producer-handler, designated in paragraph (b)(1) of this section, is 
delivered in the name of another person as producer milk to another 
handler.
    (2) The producer-handler handles fluid milk products derived from 
sources other than the milk production facilities and resources 
designation in paragraph (b)(1) of this section, except that it may 
receive at its plant, or acquire for route disposition, fluid milk 
products from fully regulated plants and handlers under any Federal 
order if such receipts do not exceed 150,000 pounds monthly. This 
limitation shall not apply if the producer-handler's own-farm 
production is less than 150,000 pounds during the month.
    (3) Milk from the milk production resources and facilities of the 
producer-handler is subject to inclusion and participation in a 
marketwide equalization pool under a milk classification and pricing 
plan operating under the authority of a State government.
    (d) Loss of producer-handler status. Notwithstanding paragraph (a) 
of this section, loss of producer-handler status for exceeding the 
limits in (c)(2) or for having more than three million pounds (or such 
lesser maximum volume that the record may so establish) of total route 
disposition and transfers in the form of packaged fluid milk products 
to other distributing plants during the month shall only be effective 
in the months where the limits are exceeded.
    (e) Public announcement. The market administrator shall publicly 
announce:
    (1) The name, plant location(s), and farm locations(s) of persons 
designated as producer-handlers;
    (2) The names of those persons whose designations have been 
cancelled; and
    (3) The effective dates of producer-handler status or loss of 
producer-handler status for each.
    (f) Burden of establishing and maintaining producer-handler status. 
The burden rests upon the handler who is designated as a producer-
handler to establish by proof satisfactory to the market administrator 
through records required pursuant to Sec.  1000.27 that the 
requirements set forth in paragraph (a) of this section have been met, 
and that the conditions set forth in paragraph (c) of this section for 
cancellation of the designation do not exist.

Proposed by Dairy Programs, Agricultural Marketing Service

Proposal No. 11

    Make such changes as may be necessary to make the entire marketing 
agreement and the order conform with any amendments thereto that may 
result from this hearing.
    Copies of this notice of hearing and the orders may be procured 
from the Market Administrator of the aforesaid marketing area, or from 
the Hearing Clerk, United States Department of Agriculture, Room 1083-
STOP 9200, 1400 Independence Avenue, SW., Washington, DC 20250-9200, or 
may be inspected there.
    Copies of the transcript of testimony taken at the hearing will not 
be available for distribution through the Hearing Clerk's Office. If 
you wish to purchase a copy, arrangements may be made with the reporter 
at the hearing.
    From the time that a hearing notice is issued and until the 
issuance of a final decision in a proceeding, Department employees 
involved in the decision-making process are prohibited from discussing 
the merits of the hearing issues on an ex parte basis with any person 
having an interest in the proceeding. For this particular proceeding, 
the prohibition applies to employees in the following organizational 
units:
    Office of the Secretary of Agriculture;
    Office of the Administrator, Agricultural Marketing Service;
    Office of the General Counsel;
    Dairy Programs, Agricultural Marketing Service (Washington Office) 
and the Office of the Market Administrator of the Mideast Milk 
Marketing Area.
    Procedural matters are not subject to the above prohibition and may 
be discussed at any time.

    Dated: February 14, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 05-3070 Filed 2-14-05; 4:17 pm]
BILLING CODE 3410-02-P