[Federal Register Volume 71, Number 173 (Thursday, September 7, 2006)]
[Rules and Regulations]
[Pages 52735-52738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-14760]



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  Federal Register / Vol. 71, No. 173 / Thursday, September 7, 2006 / 
Rules and Regulations  

[[Page 52735]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV06-985-2 FIR]


Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Revision of the Salable Quantity and Allotment 
Percentage for Class 3 (Native) Spearmint Oil for the 2006-2007 
Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Agriculture (USDA) is adopting, as a final 
rule, without change, an interim final rule revising the quantity of 
Class 3 (Native) spearmint oil that handlers may purchase from, or 
handle for, producers during the 2006-2007 marketing year. This rule 
continues in effect the action that increased the Native spearmint oil 
salable quantity from 1,007,886 pounds to 1,161,260 pounds, and the 
allotment percentage from 46 percent to 53 percent. The marketing order 
regulates the handling of spearmint oil produced in the Far West and is 
administered locally by the Spearmint Oil Administrative Committee 
(Committee). The Committee recommended this rule for the purpose of 
avoiding extreme fluctuations in supplies and prices to help maintain 
stability in the Far West spearmint oil market.

DATES: Effective Date: October 10, 2006.

FOR FURTHER INFORMATION CONTACT:  Susan M. Hiller, Marketing Specialist 
and Gary D. Olson, Regional Manager, Northwest Marketing Field Office, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or E-mail: 
[email protected] and [email protected], respectively.
    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 Order 
No. 985 (7 CFR part 985), as amended, regulating the handling of 
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and 
designated parts of Nevada and Utah), 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.''
    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 provisions of the marketing order now in 
effect, salable quantities and allotment percentages may be established 
for classes of spearmint oil produced in the Far West. This rule 
continues in effect the action that increased the quantity of Native 
spearmint oil produced in the Far West that may be purchased from or 
handled for producers by handlers during the 2006-2007 marketing year, 
which ends on May 31, 2007. 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. A 
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.
    The original salable quantity and allotment percentages for Scotch 
and Native spearmint oil for the 2006-2007 marketing year were 
recommended by the Committee at its October 5, 2005, meeting. The 
Committee recommended salable quantities of 878,205 pounds and 
1,007,886 pounds, and allotment percentages of 45 percent and 46 
percent, respectively, for Scotch and Native spearmint oil. A proposed 
rule was published in the Federal Register on February 1, 2006 (71 FR 
5183). Comments on the proposed rule were solicited from interested 
persons until March 3, 2006. No comments were received. Subsequently, a 
final rule establishing the salable quantities and allotment 
percentages for Scotch and Native spearmint oil for the 2006-2007 
marketing year was published in the Federal Register on April 5, 2006 
(71 FR 16986).
    This rule continues in effect the action that revised the quantity 
of Native spearmint oil that handlers may purchase from, or handle for, 
producers during the 2006-2007 marketing year, which ends on May 31, 
2007. Pursuant to authority contained in Sec. Sec.  985.50, 985.51, and 
985.52 of the order, the Committee, with seven of the eight members 
present, met on April 18, 2006, and unanimously recommended that the 
2006-2007 Native spearmint oil allotment percentage be increased by 7 
percent.
    Thus, taking into consideration the following discussion on 
adjustments to the Native spearmint oil salable quantity, the 2006-2007 
marketing year salable quantity and allotment percentage for Native 
spearmint oil is increased to 1,161,260 pounds and 53 percent, 
respectively.
    The salable quantity is the total quantity of each class of oil 
that handlers may purchase from, or handle for, producers during the 
marketing year. The total salable quantity is divided by the total 
industry allotment base to determine an allotment percentage. Each 
producer is allotted a share of the salable quantity by applying the 
allotment percentage to the producer's individual allotment base for 
the applicable class of spearmint oil.

[[Page 52736]]

    The estimated total industry allotment base for Native spearmint 
oil for the 2006-2007 marketing year was established at 2,191,056 
pounds. This figure represents a one percent increase over the revised 
2005-2006 total allotment base. This figure is generally revised each 
year on June 1 due to producer base being lost because of the bona fide 
effort production provisions of Sec.  985.53(e). The revision is 
usually minimal.
    By increasing the salable quantity and allotment percentage, this 
final rule makes an additional amount of Native spearmint oil available 
by releasing oil from the reserve pool. When applied to each individual 
producer, the allotment percentage increase allows each producer with 
reserve pool oil to take up to an amount equal to their allotment base 
from their reserve for this class of oil. Before November 1, 2006, a 
producer may also transfer excess oil to another producer to enable 
that producer to fill a deficiency in that producer's annual allotment 
for this class of oil.
    The following table summarizes the Committee recommendation:

Native Spearmint Oil Recommendation

    (A) Estimated 2006-2007 Allotment Base--2,191,056 pounds. This is 
the estimate on which the original 2006-2007 Native spearmint oil 
salable quantity and allotment percentage was based.
    (B) Original 2006-2007 Allotment Percentage--46 percent. This was 
unanimously recommended by the Committee on October 5, 2005.
    (C) Original 2006-2007 Salable Quantity--1,007,886 pounds. This 
figure is 46 percent of the estimated 2006-2007 allotment base of 
2,191,056 pounds.
    (D) Increase in Allotment Percentage--7 percent. The Committee 
recommended a 7 percent increase at its April 18, 2006, meeting.
    (E) 2006-2007 Allotment Percentage--53 percent. This figure is 
derived by adding the increase of 7 percent to the original 2006-2007 
allotment percentage of 46 percent.
    (F) Calculated Revised 2006-2007 Salable Quantity--1,161,260 
pounds. This figure is 53 percent of the estimated 2006-2007 allotment 
base of 2,191,056 pounds.
    (G) Computed Increase in the 2006-2007 Salable Quantity--153,374 
pounds. This figure is 7 percent of the estimated 2006-2007 allotment 
base of 2,191,056 pounds.
    In making this recommendation, the Committee considered all 
available information on price, supply, and demand. The Committee also 
considered reports and other information from handlers and producers in 
attendance at the meeting and reports given by the Committee manager 
from handlers and producers who were not in attendance. On average, 
handlers estimated that the demand for 2006-2007 Native spearmint oil 
is 300,000 pounds above the quantity already contracted for sale.
    The 2006-2007 marketing year began on June 1, 2006, with an 
estimated carry-in of 50,000 pounds of salable oil. When the estimated 
carry-in is added to the original 2006-2007 salable quantity of 
1,007,886 pounds, a total estimated available supply for the 2006-2007 
marketing year of 1,057,886 pounds results. Of this amount, 819,560 
pounds of oil has already been contracted for the 2006-2007 marketing 
year. Additionally, an estimated deficiency of 133,800 pounds may exist 
from producers not producing their full salable quantity. As a result, 
an estimated 104,526 pounds of oil would remain uncontracted and 
available for sale without this increase. This increase supplies an 
additional 153,374 pounds of oil to the market, resulting in 257,900 
pounds of oil available for contracting for 2006-2007 marketing year.
    The Committee was reluctant to recommend any more of an increase in 
the salable quantity due to the uncertainty of the 2006-2007 marketing 
year; however, the Committee continues to believe that an increase is 
necessary to supply the higher quantity of Native spearmint oil 
demanded according to their revised market estimate. Therefore, the 
industry may not be able to meet market demand without this increase. 
In addition, when the Committee made its original recommendation for 
the establishment of the Native spearmint oil salable quantity and 
allotment percentage for the 2006-2007 marketing year, it had 
anticipated that the year would end with an ample available supply.
    Based on its analysis of available information, USDA has determined 
that the salable quantity and allotment percentage for Native spearmint 
oil for the 2006-2007 marketing year should be increased to 1,161,260 
pounds and 53 percent, respectively.
    This rule finalizes an interim final rule that relaxed the 
regulation of Native spearmint oil and will allow producers to meet 
market demand while improving producer returns. In conjunction with the 
issuance of this rule, the Committee's revised marketing policy 
statement for the 2006-2007 marketing year has been reviewed by USDA. 
The Committee's marketing policy statement, a requirement whenever the 
Committee recommends implementing volume regulations or recommends 
revisions to existing volume regulations, meets the intent of Sec.  
985.50 of the order. During its discussion of revising the 2006-2007 
salable quantity and allotment percentage, the Committee considered: 
(1) The estimated quantity of salable oil of each class held by 
producers and handlers; (2) the estimated demand for each class of oil; 
(3) prospective production of each class of oil; (4) total of allotment 
bases of each class of oil for the current marketing year and the 
estimated total of allotment bases of each class for the ensuing 
marketing year; (5) the quantity of reserve oil, by class, in storage; 
(6) producer prices of oil, including prices for each class of oil; and 
(7) general market conditions for each class of oil, including whether 
the estimated season average price to producers is likely to exceed 
parity. Conformity with USDA's ``Guidelines for Fruit, Vegetable, and 
Specialty Crop Marketing Orders'' has also been reviewed and confirmed.
    The increase in the Native spearmint oil salable quantity and 
allotment percentage allows for anticipated market needs for this class 
of oil. In determining anticipated market needs, consideration by the 
Committee was given to historical sales, and changes and trends in 
production and demand.

Final 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 final 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 the 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 eight spearmint oil handlers subject to regulation under 
the order, and approximately 59 producers of Scotch spearmint oil and 
approximately 88 producers of Native spearmint oil in the regulated 
production area. Small agricultural service firms are defined by the 
Small Business Administration (SBA) (13 CFR 121.201) as those having 
annual receipts of less than $6,500,000, and small agricultural 
producers are

[[Page 52737]]

defined as those having annual receipts of less than $750,000.
    Based on the SBA's definition of small entities, the Committee 
estimates that 2 of the 8 handlers regulated by the order could be 
considered small entities. Most of the handlers are large corporations 
involved in the international trading of essential oils and the 
products of essential oils. In addition, the Committee estimates that 
19 of the 59 Scotch spearmint oil producers and 18 of the 88 Native 
spearmint oil producers could be classified as small entities under the 
SBA definition. Thus, a majority of handlers and producers of Far West 
spearmint oil may not be classified as small entities.
    The Far West spearmint oil industry is characterized by producers 
whose farming operations generally involve more than one commodity, and 
whose income from farming operations is not exclusively dependent on 
the production of spearmint oil. A typical spearmint oil-producing 
operation has enough acreage for rotation such that the total acreage 
required to produce the crop is about one-third spearmint and two-
thirds rotational crops. Thus, the typical spearmint oil producer has 
to have considerably more acreage than is planted to spearmint during 
any given season. Crop rotation is an essential cultural practice in 
the production of spearmint for weed, insect, and disease control. To 
remain economically viable with the added costs associated with 
spearmint oil production, most spearmint oil-producing farms fall into 
the SBA category of large businesses.
    Small spearmint oil producers generally are not as extensively 
diversified as larger ones and as such are more at risk to market 
fluctuations. Such small producers generally need to market their 
entire annual crop and do not have the luxury of having other crops to 
cushion seasons with poor spearmint oil returns. Conversely, large 
diversified producers have the potential to endure one or more seasons 
of poor spearmint oil markets because income from alternate crops could 
support the operation for a period of time. Being reasonably assured of 
a stable price and market provides small producing entities with the 
ability to maintain proper cash flow and to meet annual expenses. Thus, 
the market and price stability provided by the order potentially 
benefit the small producer more than such provisions benefit large 
producers. Even though a majority of handlers and producers of 
spearmint oil may not be classified as small entities, the volume 
control feature of this order has small entity orientation.
    This rule continues in effect the action that revised the quantity 
of Native spearmint oil that handlers may purchase from, or handle for, 
producers during the 2006-2007 marketing year, which ends on May 31, 
2007. That interim final rule increased the Native spearmint oil 
salable quantity from 1,007,886 pounds to 1,161,260 pounds, and the 
allotment percentage from 46 percent to 53 percent.
    An econometric model was used to assess the impact that volume 
control has on the prices producers receive for their commodity. 
Without volume control, spearmint oil markets would likely be over-
supplied, resulting in low producer prices and a large volume of oil 
stored and carried over to the next crop year. The model estimates how 
much lower producer prices would likely be in the absence of volume 
controls.
    The recommended allotment percentages, upon which 2006-2007 
producer allotments are based, are 45 percent for Scotch and 53 percent 
for Native (a 7 percentage point increase from the original salable 
percentage of 46 percent). Without volume controls, producers would not 
be limited to these allotment levels, and could produce and sell 
additional spearmint oil. The econometric model estimated a $1.40 
decline in the season average producer price per pound (from both 
classes of spearmint oil) resulting from the higher quantities that 
would be produced and marketed if volume controls were not used (i.e., 
if the salable percentages were set at 100 percent).
    Loosening the volume control restriction by increasing the 
allotment percentages resulted in this revised price decline estimate 
of $1.40 per pound if volume controls were not used. A previous price 
decline estimate of $1.49 per pound was based on the 2006-2007 
allotment percentages (45 percent for Scotch and 46 percent for Native) 
published in the Federal Register on April 5, 2006 (71 FR 16986).
    The surplus situation for the spearmint oil market that would exist 
without volume controls in 2006-2007 also would likely dampen prospects 
for improved producer prices in future years because of the buildup in 
stocks.
    The use of volume controls allows the industry to fully supply 
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume controls is believed to have 
little or no effect on consumer prices of products containing spearmint 
oil and will not result in fewer retail sales of such products.
    Based on projections available at the meeting, the Committee 
considered alternatives to the increase finalized herein. The Committee 
not only considered leaving the salable quantity and allotment 
percentage unchanged, but also looked at various increases ranging from 
0 percent to 10 percent. The Committee reached its recommendation to 
increase the salable quantity and allotment percentage for Native 
spearmint oil after careful consideration of all available information, 
and believes that the level recommended will achieve the objectives 
sought. Without the increase, the Committee believes the industry would 
not be able to meet market needs.
    The AMS is committed to compliance with the E-Government Act, to 
promote the use of the Internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.
    This rule will not impose any additional reporting or recordkeeping 
requirements on either small or large spearmint oil 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.
    In addition, as noted in the initial regulatory flexibility 
analysis, USDA has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this rule.
    Further, the Committee's meeting was widely publicized throughout 
the spearmint oil industry and all interested persons were invited to 
attend the meeting and participate in Committee deliberations. Like all 
Committee meetings, the April 18, 2006, meeting was a public meeting 
and all entities, both large and small, were able to express their 
views on this issue.
    An interim final rule concerning this action was published in the 
Federal Register on May 26, 2006. Copies of the rule were mailed by the 
Committee's staff to all committee members, producers, handlers, and 
other interested persons. In addition, the rule was made available 
through the Internet by USDA and the Office of the Federal Register. 
That rule provided for a 60-day comment period which ended July 25, 
2006. No comments were received.
    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.

[[Page 52738]]

    After consideration of all relevant material presented, including 
the Committee's recommendation, and other information, it is found that 
finalizing the interim final rule, without change, as published in the 
Federal Register (71 FR 30266, May 26, 2006) will tend to effectuate 
the declared policy of the Act.

List of Subjects in 7 CFR Part 985

    Marketing agreements, Oils and fats, Reporting and recordkeeping 
requirements, Spearmint oil.

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL 
PRODUCED IN THE FAR WEST

0
Accordingly, the interim final rule amending 7 CFR part 985, which was 
published at 71 FR 30266 on May 26, 2006, is adopted as a final rule 
without change.

    Dated: August 31, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
 [FR Doc. E6-14760 Filed 9-6-06; 8:45 am]
BILLING CODE 3410-02-P