[Federal Register Volume 74, Number 232 (Friday, December 4, 2009)]
[Rules and Regulations]
[Pages 63541-63544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-28924]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1207

[Doc. No. AMS-FV-09-0024; FV-09-706FR]


Potato Research and Promotion Plan; Assessment Increase

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule amends the Potato Research and Promotion Plan (Plan) 
to increase the assessment rate on handlers and importers of potatoes 
from 2.5 cents to 3 cents per hundredweight. This increase is provided 
for under the Plan which is authorized by the Potato Research and 
Promotion Act (Act). The National Potato Promotion Board, which 
administers the Plan, recommended this action to sustain and expand 
their promotional, research, advertising and communications programs.

DATES: Effective: December 7, 2009.

FOR FURTHER INFORMATION CONTACT: Deborah Simmons, Marketing Specialist, 
Research and Promotion Branch, Fruit and Vegetable Programs, AMS, USDA, 
1400 Independence Avenue, SW., Room 0632, Stop 0244, Washington, DC 
20250-0244; telephone: (202) 720-9915; or fax: (202) 205-2800; or e-
mail: [email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under the Potato 
Research and Promotion Plan [7 CFR part 1207]. The Plan is authorized 
under the Potato Research and Promotion Act [7 U.S.C. 2611-2627]. This 
rule increases the assessment rate on handlers and importers of 
potatoes from 2.5 cents to 3 cents per hundredweight.

Executive Order 12866

    The Office of Management and Budget (OMB) has waived the review 
process required by Executive Order 12866 for this action.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect.
    The Act allows handlers and importers subject to the Plan to file a 
written petition with the Secretary of Agriculture (Secretary) if they 
believe that the Plan, any provision of the Plan, or any obligation 
imposed in connection with the Plan, is not in accordance with the law. 
In any petition, the person may request a modification of the Plan or 
an exemption from the Plan. The petitioner will have the opportunity 
for a hearing on the petition. Afterwards, an Administrative Law Judge 
(ALJ) will issue a decision. If the petitioner disagrees with the ALJ's 
ruling, the petitioner has 30 days to appeal to the Judicial Officer, 
who will issue a ruling on behalf of the Secretary. If the petitioner 
disagrees with the Secretary's ruling, the petitioner may file, within 
20 days, an appeal in the U.S. District Court for the district where 
the petitioner resides or conducts business.

Regulatory Flexibility Act and Paperwork Reduction Act

    In accordance with the Regulatory Flexibility Act (RFA) [5 U.S.C. 
601 et seq.], the Agricultural Marketing Service (AMS) has considered 
the economic impact of this rule on small entities. The purpose of the 
RFA is to fit regulatory actions to the scale of businesses subject to 
such action in order that small businesses will not be unduly or 
disproportionately burdened.
    The Small Business Administration defines, in 13 CFR part 121, 
small agricultural producers as those having annual receipts of no more 
than $750,000 and small agricultural service firms (handlers and 
importers) as those having annual receipts of no more than $7 million. 
According to the Board, there are approximately 1,600 potato growing 
operations, 1,143 handlers and 252 importers who are subject to the 
provisions of the Plan. According to the National Agricultural 
Statistics Service (NASS), data from the 2008 crop year shows that 
approximately 395 cwt. of potatoes were produced per acre. The 2008 
grower price published by NASS was $9.46 per cwt. Thus the value of 
potato production per acre in 2008 averaged $3,736.70 (395 times $9.36 
cwt). At that average price, a producer would have to farm over 201 
acres to receive an annual income from potatoes of $750,000 ($750,000 
divided by $3,736.70 per acre equals 201 acres). Thus, it can be 
concluded that most producers, handlers and importers would not be 
classified as small businesses under the criteria established by the 
SBA.
    Producers of less than 5 acres of potatoes are exempt from this 
program. Potato and potato products used for nonhuman food purposes, 
other than seed, are exempt from assessment but are subject to the 
disposition of exempted potatoes provisions of section 1207.515 of the 
regulations.
    Under the current Plan, potato handlers and importers are required 
to pay an assessment of 2.5 cents per hundredweight. Handlers may 
collect assessments from the producer or deduct assessments from 
proceeds paid to the producer on whose potatoes the assessments are 
made. No more than one assessment shall be made on any potatoes or 
potato products. Funds collected by the board shall be used for 
research, development, advertising or promotion of potatoes and potato 
products and such other expenses for the administration, maintenance 
and functioning of the Board as may be authorized by the Secretary. The 
assessment at the current 2.5 cents per hundredweight generates about 
$10 million in annual revenues. The 2.5 cents per hundredweight 
assessment rate was established in August 2006 when the Plan was 
amended. The Plan is administered by the Board under U.S. Department of 
Agriculture supervision.
    According to the Board, additional revenue is required in order to 
sustain and expand the promotional, research, advertising and 
communications programs. The Board approved the assessment rate 
increase at its March 13, 2009, meeting. This increase is consistent 
with section 1207.342(a) of the Plan which states that funds to cover 
the Board's expenses shall be acquired by the levying of assessments 
upon handlers and importers as designated in regulations recommended by 
the Board and issued by the Secretary. Such assessments shall be levied 
at the rate fixed by the Secretary which shall not exceed one-half of 
one per centum of the immediate past ten calendar years United States 
average price received for potatoes by growers as reported by the 
Department of Agriculture. Currently, section 1207.510 of the Plan 
states that an assessment of 2.5 cents per hundredweight shall be 
levied on all potatoes produced within the 50 states of the United 
States and an assessment rate of 2.5 cents per hundredweight shall be 
levied on all tablestock potatoes imported into the United States for 
ultimate consumption by humans and all seed potatoes. An assessment 
rate of 2.5 cents per hundredweight shall be levied on the fresh weight 
equivalents of

[[Page 63542]]

imported frozen or processed potatoes for ultimate consumption by 
humans. Further, not more than one such assessment may be collected on 
any potatoes or potato products.
    In March 2007, the Board conducted its most recent ``Evaluation of 
Grower-Funded Value-Added Activities by the United States Potato 
Board.'' This study was completed by Dr. Timothy Richards and Dr. Paul 
Patterson of the Morrison School of Management and Agribusiness at 
Arizona State University. The study presented an econometric evaluation 
of the demand impact of board marketing, public relations and research 
activities and a simulation model that estimates the return on grower 
investment in board programs. The primary objective of this research 
was to estimate the long-run return on grower's investment in each 
board activity, in both domestic and export marketing.
    The U.S. potato market was volatile over the five year period (CY 
2002-CY 2006). According to USDA data, the per capita consumption of 
potatoes, of all forms in the U.S., changed very little over this 
period. Grower prices, on the other hand, were strong in 2001, but fell 
through the 2004 marketing season. High prices may have been due to the 
activities of a newly formed potato industry cooperative comprising 
some 65% of the U.S. potato supply. In 2001 the Board adopted a new 
business model for increasing potato consumption, eschewing traditional 
generic advertising programs for retail partnerships, public relations, 
marketing research, product development and active export promotion 
programming. The objective of this study was to determine the return on 
investment to grower funds invested in board marketing activities. The 
relevant markets for U.S. potatoes are defined as the domestic retail 
market (frozen, refrigerated, chips, bagged fresh, bulk fresh and 
dehydrated potatoes), the domestic food service market (skins, chips, 
formed products, hash browns, mashed, frozen, French fries, and whole 
potatoes), and export marketing for fresh (table stock and chipping 
stock), frozen, dehydrated and seed potatoes.
    Econometric models were used to estimate the demand impact of board 
activities. Five models were created for this purpose: Domestic Retail, 
Domestic Foodservice model, Domestic ``Best Practices'' model to 
estimate the effect of targeted category management programs, and two 
export marketing models: One for Fresh, Frozen and Dehydrated potatoes 
and another for Seed potatoes. All models are estimated with data made 
available from board records and include retail scanner data, food 
service supplier survey data and USDA export data.
    The study found that U.S. potato growers have received a 
significantly positive return on their investment in USPB activities 
over the FY 2002-FY 2006 period covered by the analysis. The study 
found that each is highly effective in increasing potato demand, 
although the final return varies widely among them. On a per dollar of 
investment basis; the most likely estimate of the return to the 
Domestic Retail program is $4.4743 in long run grower profit, while the 
Foodservice program provides a return of $3.035 per dollar of 
investment. Considering the Best Practices program on its own, which is 
part of the Domestic Retail effort; category management investments 
provide incremental revenue of $1.018 per dollar of program cost. On 
the export side, Frozen Consumer program generate a return of $1.27, 
while Frozen Trade activities return $1.11 and $1.19, respectively, 
while Fresh Consumer and Trade activities yield $10.36 and $6.93 per 
dollar. In all cases, these Returns on Investments estimates are at 
least as high as growers could earn on investments elsewhere and, in 
many cases, several times greater.
    The Board's Executive Committee collectively recognized the need to 
sustain the momentum of current board programs, which continue to 
``Maximize Return on Grower Investment.'' According to the Board, the 
board's domestic and global market strategies to increase demand for 
U.S. Potatoes and Potato Products have been highly successful, but 
industry and economic conditions have eroded the board's ability to 
fund the future needs of all its programs. The Board's Executive 
Committee proposed the \1/2\-cent increase in the assessment rate in 
order to maintain the value in all programs. Over the last three fiscal 
years, however, several trends have asserted downward pressure on the 
board programs continued ability to sustain the industry recognized 
high level of return. Acreage decreases, produced by right-sizing 
supply with demand, and competition for acres to produce other crops, 
has reduced revenues' to the board. Higher costs, driven by worldwide 
inflation have increased the expenses of implementing board programs. 
The weakened U.S. dollar, in relation to the exchange rates of foreign 
currencies, has reduced the Board's purchasing power in obtaining 
needed goods and services to operate international marketing programs 
in foreign markets.
    Alternatives were also considered by the Board, which included 
cutting back funding of marketing programs, international programs, and 
the new ``Potatoes Goodness Unearthed'' campaign. All of the 
alternatives were rejected by the Board. The Board believes that 
programs should not be reduced at a time when it's absolutely critical 
that they continue providing them, that it's a reasonable cost for 
keeping programs going and that the Board needs to maintain adequate 
reserves to handle food safety issues and other projects. The Board 
feels the direction it is going is in line with the grower's vision and 
that the assessment fee is money well invested. The Board believes that 
in order to continue to fund these and new programs, an increase in the 
assessment rate by \1/2\ cent per hundredweight is needed.
    Using the USDA previous 10-year average potato prices formula in 
the Plan, the assessment rate can be increased to 3.08 cents per 
hundredweight. However, it was determined that the rate would be 
increased \1/2\ cent from 2.5 cents to 3 cents per hundredweight and 
that \1/2\ cent would be easy to understand, communicate and ultimately 
to put into a collection system and at a full year of collection will 
deliver enough revenue to maintain the current programs with modest 
expansion. The \1/2\-cent increase falls within the allowed limits in 
the Plan.
    Using the 10-year average market price and average yield values of 
potatoes in the U.S., the increase in assessment rate to 3 cents per 
hundredweight will result in an average cost to growers of $11.93 per 
acre, which represents less than one-half of one percent (0.445 
percent) of potato revenue per acre. Calculated at the current market 
price for potatoes of $8.36 per cwt: At the 3 cents per cwt assessment 
the total assessment for growers would be 0.359 percent of gross 
revenue per acre.
    All potatoes are assessed the same assessment rate into the program 
regardless of origin--either U.S. grown or imported as fresh potatoes 
or potato products. The same assessments for domestic production and 
imports will be unchanged by the rate increase.
    In order to sustain and expand the promotional, research, and 
communication programs, the Board decided to propose an increase in the 
assessment rate of \1/2\ cent per hundredweight for a total assessment 
rate of 3 cents per hundredweight on all domestic and imported potatoes 
and potato products.

[[Page 63543]]

    This rule does not impose additional recordkeeping requirements on 
handlers or importers of potatoes. Producers of fewer than 5 acres of 
potatoes annually are exempt.
    There are no Federal rules that duplicate, overlap, or conflict 
with this rule.
    In accordance with the Office of Management and Budget (OMB) 
regulation [5 CFR part 1320] which implements the Paperwork Reduction 
Act of 1995 [44 U.S.C. Chapter 35], the information collection and 
recordkeeping requirements that are imposed by the Plan have been 
approved previously under OMB control number 0581-0093. This rule does 
not result in a change to the information collection and recordkeeping 
requirements previously approved.

Background

    Under the Plan, which became effective March 9, 1972, the Board 
administers a nationally coordinated program of research, development, 
advertising, and promotion designed to strengthen potatoes competitive 
position and expand domestic and foreign markets for potatoes and 
potato products. This program is financed by assessments on handlers 
and importers of potatoes and potato products. The Plan specifies that 
handlers are responsible for collecting and submitting assessments to 
the Board, reporting their handling of potatoes, and maintaining 
records necessary to verify their reporting. Handlers may collect 
assessments from producers or deduct assessments from the proceeds paid 
to the producer on whose potatoes the assessments are made. Importers 
are responsible for payment of assessments to the Board on potatoes 
imported into the United States through the U.S. Customs Service and 
Border Protection.
    Based on the most recent data available in March 2009 from USDA, 
the average price received for potatoes for the period 1999 to 2008 was 
$6.74 per hundredweight. One-half of 1 per centum of this average price 
would allow a maximum assessment rate of $0.0337 cents per 
hundredweight. If the board had elected to use $0.0337 cents per 
hundredweight in its fiscal year 2008, when 449.7 million hundredweight 
of potatoes were assessed, the Board would have realized assessment 
dollars of $15,155,963 (vs. $11,243,296 actual collected in FY 2008), 
an increase in assessment revenue of $3.9 million.
    A proposed rule was published in the Federal Register on July 27, 
2009 [74 FR 36952]. Copies of the rule were made available through the 
Internet by the Department and the Office of the Federal Register. That 
rule provided a sixty-day comment period which ended September 25, 
2009. Four comments were received by the deadline.
    This rule increases the assessment rate by \1/2\ cent per 
hundredweight for handlers and importers. Currently, the assessment 
rate is 2.5 cents per hundredweight levied on potatoes handled within 
the 50 States of the United States and 2.5 cents per hundredweight on 
imports of potatoes and potato products. According to the Board, in 
order to sustain and expand the promotion, research, and communications 
programs at present levels, the Board contends that additional revenue 
is required. The \1/2\ cent per hundredweight assessment rate increase 
is estimated to generate $1 to $1.5 million in new revenue, depending 
upon production levels.
    Based on assessments collected for crop year 2008, about 87 percent 
of this production total was from domestic assessments, with the 
remainder from imports. The Board states that the assessment rate 
increase would enable it to expand media services, educational 
programs, research programs, and establish, maintain, and expand 
domestic and foreign markets for potatoes. Some of the additional 
revenue, the Board states, would be used to increase the reserve fund 
over a two-year period to provide for adequate cash flow. Based on the 
2008 crop year production figures, the Board would have received 
$13,491.955 in total assessments at the 3 cents per hundredweight 
assessment rate on potatoes.
    In addition, the Board, whose members represent all potato 
producing states as well as importers, voted to propose the assessment 
rate increase at its March 13, 2009 meeting which was open to the 
public like all other meetings. The vote to recommend the assessment 
increase was 68 in favor and 7 against of the Board members present at 
the meeting. Most of the dissenting votes concerned the impact the 
increase would have on small growers.

Summary of Comments

    In response to the proposed rule, the Department received four 
comments regarding the proposed amendment to the Plan to increase the 
assessment rate on handlers and importers of potatoes from 2.5 cents to 
3 cents per hundredweight. Three comments were received from current 
Board members who state that being on the Board gives them a unique 
perspective on how the Board is helping to increase the demand for 
potato and potato products in the domestic and international markets. 
One comment was received from a trade association that represents the 
potato industry. All four of the comments were in favor of the proposed 
amendment, citing the need for the increased assessment rate to fund 
programs that will continue to be successful and increase demand for 
potatoes and potato products in domestic and international markets.
    The Department has considered all of the comments and is not making 
any changes to the proposed rule based on them.
    Pursuant to 5 U.S.C. 553, it is also found that good cause exists 
for not postponing the effective date of this action until one day 
after publication in the Federal Register because (1) the Board's 
Finance Committee needs the new assessment rate by the beginning of the 
calendar year so that they may develop a timely budget recommendation; 
(2) the Board needs the additional assessments for sustaining ongoing 
projects and developing new projects to create demand for potatoes and 
potato products in foreign and domestic markets; and (3) all comments 
supported the proposed assessment increase.

List of Subjects in 7 CFR Part 1207

    Administrative practice and procedure, Advertising, Consumer 
information, Marketing agreements, Potatoes, Promotion, Reporting and 
recordkeeping requirements.

0
For the reasons set forth in the preamble, Part 1207, Chapter XI of 
Title 7 is amended as follows:

PART 1207--POTATO RESEARCH AND PROMOTION PLAN

0
1. The authority citation for 7 CFR part 1207 continues to read as 
follows:

    Authority:  7 U.S.C. 2611-2627 and 7 U.S.C. 7401.


0
2. Section 1207.510 is amended by revising paragraphs (a)(1), (b)(1) 
and the Table in paragraph (b)(3) as follows:


Sec.  1207.510  Levy of assessments.

    (a) * * * (1) An assessment rate of 3 cents per hundredweight shall 
be levied on all potatoes produced within the 50 states of the United 
States.
* * * * *
    (b) * * * (1) An assessment rate of 3 cents per hundredweight shall 
be levied on all tablestock potatoes imported into the United States 
for ultimate consumption by humans and all seed potatoes imported into 
the United

[[Page 63544]]

States. An assessment rate of 3 cents per hundredweight shall be levied 
on the fresh weight equivalents of imported frozen or processed 
potatoes for ultimate consumption by humans. The importer of imported 
tablestock potatoes, potato products, or seed potatoes shall pay the 
assessment to the board through the U.S. Customs Service and Border 
Protection at the time of entry or withdrawal for consumption of such 
potatoes and potato products into the United States.
* * * * *
    (3) * * *

------------------------------------------------------------------------
                                                    Assessment
Tablestock potatoes, frozen or processed -------------------------------
       potatoes, and seed potatoes           Cents/cwt       Cents/kg
------------------------------------------------------------------------
0701.10.0020............................           3.0             0.066
0701.10.0040............................           3.0             0.066
0701.90.1000............................           3.0             0.066
0701.90.5010............................           3.0             0.066
0701.90.5020............................           3.0             0.066
0701.90.5030............................           3.0             0.066
0701.90.5040............................           3.0             0.066
0710.10.0000............................           6.0             0.132
2004.10.4000............................           6.0             0.132
2004.10.8020............................           6.0             0.132
2004.10.8040............................           6.0             0.132
2005.20.0070............................           4.716           0.104
0712.90.3000............................          21.429           0.472
1105.10.0000............................          21.429           0.472
1105.20.0000............................          21.429           0.472
2005.20.0040............................          21.429           0.472
2005.20.0020............................          12.240           0.27
1108.13.0010............................          27.0             0.595
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* * * * *

    Dated: November 30, 2009.
Rayne Pegg,
Administrator.
[FR Doc. E9-28924 Filed 12-3-09; 8:45 am]
BILLING CODE 3410-02-P