[Federal Register Volume 71, Number 62 (Friday, March 31, 2006)]
[Rules and Regulations]
[Pages 16198-16201]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-3099]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1435

RIN 0560-AH37


Transfer of Sugar Program Marketing Allocations

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: This rule amends the sugar program regulations of the 
Commodity Credit Corporation (CCC). The provisions for transferring 
sugar marketing allocation when a mill closes and growers request to 
move their allocation are amended. A regulatory deadline, the 20th of 
each month, for the program's information reporting requirements is 
added. Also, each cane processor, cane refiner and beet processor will 
be required to provide an annual report prepared by a Certified Public 
Accountant (CPA) that verifies the company's data submitted to CCC.

DATES: Effective Date: March 31, 2006.

FOR FURTHER INFORMATION CONTACT: Barbara Fecso at (202) 720-4146, or 
via e-mail at [email protected]. Persons with disabilities who 
require alternative means for communication (Braille, large print, 
audiotape, etc.) should contact the USDA Target Center at (202) 720-
2600 (voice and TDD).

SUPPLEMENTARY INFORMATION: The Commodity Credit Corporation (CCC) 
published a proposed rule on September 7, 2005 (70 FR 53103). Public 
comments were accepted until November 7, 2005. The rule proposed three 
changes to the Sugar Program Regulations at 7 CFR part 1435.
    First CCC proposed to amend the regulations for transferring sugar 
marketing allocation when a mill closes. The proposed rule provided 
that the closed mill's allocation would be distributed based on the 
production history of the growers requesting to move their allocation.
    To understand the change that was proposed, it is necessary to 
understand the relationship between processors, growers, and how 
allocations have been determined.
    The Sugar Program was authorized by section 359 of the Agricultural 
Adjustment Act of 1938, as amended by the Farm Security and Rural 
Investment Act of 2002 (the ``2002 Act'') (7 U.S.C. 1359aa et seq.). 
The 2002 Act requires CCC to periodically analyze market factors and 
establish a national sugar marketing allotment to limit the

[[Page 16199]]

quantity of sugar that processors can market. The goal is to achieve a 
price level that will minimize sugar loan collateral forfeitures to 
CCC. Once the overall marketing allotment is established, it is 
allocated between the beet sugar and cane sugar sectors (54.35 and 
45.65 percent, respectively). The beet allotment is allocated directly 
to beet processors, the cane allotment is allocated to four cane-
producing states (Florida, Louisiana, Hawaii and Texas), and is further 
allocated among sugar cane processing mills within each state. Each 
mill, in turn, divides its allocation among its sugar cane growers. 
While the allocation formula in the regulation for the beet sector has 
not changed since 2002, the formula in the regulation for cane state 
allotments and cane processor allocations was changed in 2004 when a 
component of the formula, the ``ability to market,'' was redefined (69 
FR 55061-55063, September 13, 2004). The problem addressed by this rule 
arose due to the new cane sector ``ability to market'' definition, 
which added the 2002 and 2003 crop years' production to the historic 
period for Florida, Louisiana and Texas.
    The current regulations provided that if a mill closes, a grower 
may petition CCC to move an allocation commensurate with its production 
history to another mill of its choice. However, when two Louisiana cane 
processing mills announced they would not reopen for the 2005 crop, 
there was debate within CCC and in the sugarcane industry about the 
petition rights of growers who had delivered cane used to establish the 
mill's allocation, but did not deliver 2002 or 2003 crop cane. Some 
parties contended that growers who had not delivered in the crop year 
before the mill closed contributed to its demise by ``shorting'' the 
mill of its customary level of cane and, therefore, should not be 
rewarded with the right to petition for a transfer. Others contended 
that as long as a grower's production contributed to the establishment 
of a mill's allocation, a grower should always be entitled to transfer 
its share of the allocation.
    The regulations at 7 CFR 1435.308, as set forth in the final rule, 
provide that CCC will distribute the closed mill's allocation based on 
the contribution of the growers' production history to the closed 
mill's allocation. This means that CCC will apply the same formula to 
each grower at the closed mill as the formula used when that mill's 
original allocation was determined. For example, if a mill closes in 
Louisiana, CCC will apply to a grower's history over the crop years 
1997 through 2001, a 25% weight for the average of the highest two 
years of past processings, a 25% weight for the average of the highest 
two years of past marketings, and a 50% weight for the ``ability to 
market'', i.e., the average of the production from the 2003 crop year 
and the Olympic average of the three years of production from among the 
1999 through 2003 crop, excluding the highest and lowest production 
years. The result of using this formula, in this example, is that the 
right to petition for transfer belongs to any grower who delivered cane 
to the closed mill from the 1997 crop year through the 2003 crop year.

Public Comments

    On this change, the Agency received 54 comments. Forty (40) sugar 
cane growers submitted form letters supporting the proposed rule, and 
nine growers submitted the same form letter but appended additional 
comments. Four sugar cane processors and the Louisiana Farm Bureau, an 
organization representing Louisiana sugarcane producers also submitted 
comments. Most of these comments were in support of the changes 
proposed. The Agency has reviewed the comments and addressed them as 
follows.
    One grower comment suggested that the landowner, not the grower, 
should name the successor mill in the event of mill closure. The Agency 
feels that the rule sufficiently addresses this concern without 
providing explicit allotment transfer rights to landowners. This is 
because CCC has found that while the grower signs the petition to 
transfer allocation to a particular mill, landowners have changed 
transfer requests when better offers were received from competing 
mills. Further, CCC has found that a grower is normally more aware of 
what is occurring in the local sugar processing market than a 
landowner, who may be located some distance from the farm. Moreover, it 
is presumed that a grower will cooperate with its landowner in the 
choice of a successor mill and not risk any disquiet to its farm or 
lease by disputing the landowner's choice of a new mill. Therefore, the 
rule provides that a grower may petition for the transfer. Thus, no 
changes are planned in the final rule as a result of this comment.
    One commenter supported the proposed rule, and suggested growers 
will place their allocation at successor mills offering the highest 
returns. The Agency generally agrees. As the commenter suggests, the 
intent of the rule was to give the grower the choice of where to 
deliver its cane if its mill closes. No change was made from the 
proposed rule in the final rule as a result of this comment.
    One mill supported the proposal to determine the grower allocation 
based on their historical production and suggested that this method 
gives the grower the freedom to choose a successor mill that best 
ensures their future in farming. The Agency agrees. This rule offers 
security to growers by guaranteeing the right to petition for transfer 
as long as they delivered cane to the mill that closed during the 
period used to establish the mill's allocation. When their mill closes, 
growers can contract with mills offering the highest returns without 
risk of losing allocation. Again, no change was made from what was in 
the proposed rule in the final rule on this issue.
    One processor agreed that the proposed method for calculating 
transferable allocation would ensure fair and equitable treatment for 
growers. However, this processor also maintained that ``replacement 
growers'' should not displace the production history from growers who 
contributed during the historical period. Replacement growers are those 
designated by the mill to supply sugarcane replacing sugarcane lost to 
the mill since the 2001 crop year and is a concept that only applies to 
Louisiana [See 7 CFR 1435.310(b)(1)(i)(C)].
    The final rule partly addresses this commenter's concerns. The 
method to be used for distributing the closed mill's allocation grants 
any grower who delivered cane to the closed mill during the period when 
the mill's allocation was established the right to petition for a 
transfer of allocation, regardless of whether or not he was a 
replacement grower. If a grower supplies sugarcane to replace sugarcane 
lost to the mill after the historical period ends, and this mill 
closes, he may not petition for transfer.
    The Louisiana Farm Bureau (LFB) strongly supported the proposed 
rule. LFB suggested that (1) it would be unfair to deny a grower who 
leaves within the last year of the historical period the right to 
transfer any allocation from a closed mill; (2) it would also be unfair 
to grant a grower who only delivers cane to a mill in the year prior to 
closure the right to petition for transfer of an allocation; and, (3) 
transferring allocations based on preceding crop year deliveries makes 
it possible to have marketing allocations awarded to non-base acreage. 
The Agency agrees. There is no change made in the final rule as a 
result of this comment.
    One processor commented that there is a distinction between a mill 
``closure'' and mill ``consolidation'' and that

[[Page 16200]]

transfer rules should apply differently. The commenter stated that when 
a mill ceases to operate (a ``closure''), growers should be able to 
choose their successor mill. However, when mills consolidate (which the 
commenter defines as to combine resources of more than one mill, and 
close a mill to achieve economies of scale), growers supplying cane to 
the closed mill should not be given the right to choose a successor 
mill. The allocation of these growers, the commenter argues, should 
stay with the remaining mill. The Agency disagrees. The authority for 
the transfer of allocation at 7 U.S.C. 1359f(c)(8) allows a grower to 
transfer allocation to another mill when the plant where it has 
established history closes. By statute, this right belongs to a grower, 
and exists to protect growers when a plant closes from having to ship 
their product beyond what is economically feasible, regardless of 
whether the closure by the mill owner was to consolidate production to 
achieve economies of scale. Typically, relationships between 
landowners, growers, processors, mills, and mill owners are defined by 
contracts, agreements, and a course of dealing over time. Absent terms 
in such an agreement which provide otherwise, when a processor closes a 
facility, the grower may transfer its allocation. Thus, the commenter's 
suggestions are not adopted and no change is planned in the final rule 
as a result.
    The second change CCC proposed is a deadline for the program's 
information reporting requirements. The required monthly information 
would be due on the 20th of each month. The third change CCC proposed 
is to require each cane processor, cane refiner, and beet processor to 
provide an annual report by a Certified Public Accountant (CPA) that 
verifies the company's data submitted to CCC. No comments were received 
on either of these proposed changes and they are adopted in the final 
rule.

Executive Order 12866

    This rule has been determined to be not significant under Executive 
Order 12866 and has not been reviewed by the Office of Management and 
Budget.

Regulatory Flexibility Act

    The requirements of the Regulatory Flexibility Act (5 U.S.C. 601-
602) do not apply to this rule because CCC is not required to publish a 
notice of proposed rulemaking for the subject of this rule. 
Nonetheless, CCC has determined that this rule will not have a 
significant economic impact on a substantial number of small entities 
and a Regulatory Flexibility Analysis was not performed.

Environmental Assessment

    The environmental impacts of this rule have been considered under 
the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et 
seq., the regulations of the Council on Environmental Quality (40 CFR 
parts 1500-1508), and regulations of the Farm Service Agency (FSA) of 
the Department of Agriculture (USDA) for compliance with NEPA, 7 CFR 
part 799. An environmental evaluation was completed and the proposed 
action has been determined not to have the potential to significantly 
impact the quality of the human environment and no environmental 
assessment or environmental impact statement is necessary. A copy of 
the environmental evaluation is available for inspection and review 
upon request.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, Civil Justice Reform. In accordance with this Executive Order: 
(1) All State and local laws and regulations that are in conflict with 
this rule will be preempted; (2) no retroactive effect will be given to 
this rule; and (3) administrative proceedings in accordance with 7 CFR 
part 11 must be exhausted before seeking judicial review.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires intergovernmental consultation with State and local officials. 
See the notice related to 7 CFR part 3015, subpart V, published at 48 
FR 29115 (June 24, 1983).

Unfunded Mandates Reform Act of 1995

    This rule contains no Federal mandates, as defined under title II 
of the UMRA, for State, local, and tribal governments or the private 
sector. Thus, this rule is not subject to the requirements of sections 
202 and 205 of UMRA.

Executive Order 13132

    The policies contained in this rule do not have any substantial 
direct effect on States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Paperwork Reduction Act

    Under 7 U.S.C. 7991(c)(2)(A) these regulations may be promulgated 
and the program administered without regard to chapter 5 of title 44 of 
the United States Code (the Paperwork Reduction Act). Accordingly, 
these regulations and the forms and other information collection 
activities needed to administer the provisions authorized by these 
regulations are not subject to review by the Office of Management and 
Budget under the Paperwork Reduction Act.

Government Paperwork Elimination Act

    CCC is committed to compliance with the Government Paperwork 
Elimination Act (GPEA) and the Freedom to E-File Act, which require 
Government agencies in general, and the FSA in particular, to provide 
the public the option of submitting information or transacting business 
electronically to the maximum extent possible. Because of the nature of 
the forms and other information collection activities required for this 
program, they are not fully implemented in a way that would allow the 
public to conduct business with CCC electronically. Accordingly, at 
this time, all forms and information required to be submitted under 
this rule may be submitted to CCC by mail or FAX.

List of Subjects in 7 CFR Part 1435

    Loan programs--agriculture, Price support programs, Reporting and 
recordkeeping requirements, and Sugar.


0
Accordingly, 7 CFR part 1435 is amended as follows:

PART 1435--SUGAR PROGRAM

0
1. The authority citation for part 1435 continues to read as follows:

    Authority: 7 U.S.C. 1359aa-1359jj and 7272 et seq.; 15 U.S.C. 
714b and 714c.


0
2. In Sec.  1435.200 revise paragraph (a), redesignate paragraph (g) as 
paragraph (h), and add new paragraph (g) to read as follows:


Sec.  1435.200  Information reporting.

    (a) Every sugar beet processor, sugarcane processor, cane sugar 
refiner, and importer of sugar, syrup, and molasses shall report, by 
the 20th of each month, on CCC-required forms, its imports and 
receipts, processing inputs, production, distribution, stocks, and 
other information necessary to administer the sugar programs. If the 
20th of the month falls on a weekend or

[[Page 16201]]

a Federal holiday, the report shall be made by the next business day.
* * * * *
    (g) By November 20 of each year, each sugar beet processor, 
sugarcane processor, sugarcane refiner, and importer of sugars, syrups, 
and molasses will submit to CCC a report, as specified by CCC, from an 
independent Certified Public Accountant that reviews its information 
submitted to CCC during the previous October 1 through September 30 
period.
* * * * *

0
3. Amend Sec.  1435.308 by revising paragraph (a) to read as follows:


Sec.  1435.308  Transfer of allocation, new entrants.

    (a) If a sugar beet or sugarcane processing facility is closed, and 
the growers that delivered their crops to the closed facility elect to 
deliver their crops to another processor, the growers may petition the 
Executive Vice President, CCC, to transfer their share of the 
allocation from the processor that closed the facility to their new 
processor. If CCC approves transfer of the allocations, it will 
distribute the closed mill's allocation based on the contribution of 
the growers' production history to the closed mill's allocation. CCC 
may grant the allocation transfer upon:
    (1) Written request by a grower to transfer allocation,
    (2) Written approval of the processing company that will accept the 
additional deliveries, and
    (3) Evidence satisfactory to CCC that the new processor has the 
capacity to accommodate the production of petitioning growers.
* * * * *

    Signed in Washington, DC, on March 17, 2006.
Teresa C. Lasseter,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 06-3099 Filed 3-30-06; 8:45 am]
BILLING CODE 3410-05-P