[Federal Register Volume 83, Number 67 (Friday, April 6, 2018)]
[Proposed Rules]
[Pages 14766-14771]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06973]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 83, No. 67 / Friday, April 6, 2018 / Proposed 
Rules  

[[Page 14766]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Doc. No. AMS-SC-17-0073; SC18-985-1 PR]


Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Salable Quantities and Allotment Percentages for the 
2018-2019 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would implement a recommendation from the 
Far West Spearmint Oil Administrative Committee (Committee) to 
establish salable quantities and producer allotments of Class 1 
(Scotch) and Class 3 (Native) spearmint oil produced in Washington, 
Idaho, Oregon, and designated parts of Nevada and Utah (the Far West) 
for the 2018-2019 marketing year. Salable quantities and allotment 
percentages help maintain stability in the Far West spearmint oil 
market. This proposed rule would also remove references to past volume 
regulation no longer in effect.

DATES: Comments must be received by June 5, 2018.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments must be sent to the Docket 
Clerk, Marketing Order and Agreement Division, Specialty Crops Program, 
AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938; or internet: http://www.regulations.gov. All comments should reference the document number 
and the date and page number of this issue of the Federal Register and 
will be made available for public inspection in the Office of the 
Docket Clerk during regular business hours or can be viewed at: http://www.regulations.gov. All comments submitted in response to this 
proposal will be included in the record and will be made available to 
the public. Please be advised that the identity of the individuals or 
entities submitting the comments will be made public on the internet at 
the address provided above.

FOR FURTHER INFORMATION CONTACT: Barry Broadbent, Marketing Specialist, 
or Gary Olson, Regional Director, Northwest Marketing Field Office, 
Marketing Order and Agreement Division, Specialty Crops Program, AMS, 
USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or Email: 
[email protected] or [email protected].
    Small businesses may request information on complying with this 
regulation by contacting Richard Lower, Marketing Order and Agreement 
Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue 
SW, STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, 
Fax: (202) 720-8938, or Email: [email protected].

SUPPLEMENTARY INFORMATION: This action, pursuant to 5 U.S.C. 553, 
proposes an amendment to regulations issued to carry out a marketing 
order as defined in 7 CFR 900.2(j). This proposal is issued under 
Marketing Order No. 985, as amended (7 CFR part 985), regulating the 
handling of spearmint oil produced in the Far West. Part 985 (referred 
to as the ``Order'') is effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.'' The Committee locally administers the Order 
and is comprised of spearmint oil producers operating within the area 
of production, and a public member.
    The Department of Agriculture (USDA) is issuing this proposed rule 
in conformance with Executive Orders 13563 and 13175. This action falls 
within a category of regulatory actions that the Office of Management 
and Budget (OMB) exempted from Executive Order 12866 review. 
Additionally, because this proposal does not meet the definition of a 
significant regulatory action, it does not trigger the requirements 
contained in Executive Order 13771. See OMB's Memorandum titled 
``Interim Guidance Implementing Section 2 of the Executive Order of 
January 30, 2017, titled `Reducing Regulation and Controlling 
Regulatory Costs'[thinsp]'' (February 2, 2017).
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This proposal is not intended to have retroactive 
effect. Under the Order now in effect, salable quantities and producer 
allotment percentages may be established for classes of spearmint oil 
produced in the Far West. This proposed rule would establish quantities 
and percentages for Class 1 (Scotch) and Class 3 (Native) spearmint oil 
for the 2018-2019 marketing year, which begins on June 1, 2018.
    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.
    Pursuant to Sec. Sec.  985.50, 985.51, and 985.52, the Order 
requires the Committee to meet each year to consider supply and demand 
of spearmint oil and a marketing policy for the ensuing marketing year. 
When such considerations indicate a need to establish or maintain 
stable market conditions through volume regulation, the Committee 
recommends salable quantity limitations and producer allotments to 
regulate the quantity of Far West spearmint oil available to the 
market.
    According to Sec.  985.12, ``salable quantity'' is the total 
quantity of each class of oil that handlers may purchase from, or 
handle on behalf of, producers during a given marketing year. The total 
industry allotment base is the aggregate of all allotment bases held 
individually by producers as prescribed under Sec.  985.53(d)(1). The 
total allotment base is generally revised each year on June 1

[[Page 14767]]

due to producer base being lost because of the bona fide effort 
production provision of Sec.  985.53(e). The allotment percentage for 
each class of spearmint oil is derived by dividing the salable quantity 
by the total industry allotment base for that same class of oil. The 
allotment percentage is the percentage used to calculate each 
producer's prorated share of the salable quantity or their ``annual 
allotment,'' as defined in Sec.  985.13.
    The Committee met on October 25, 2017, to consider its marketing 
policy for the 2018-2019 marketing year. At that meeting, the Committee 
determined that, based on overall market and supply conditions, volume 
regulation for Classes 1 and 3 (Scotch and Native, respectively) 
spearmint oil would be necessary. With a unanimous vote, the Committee 
recommended the establishment of a salable quantity and allotment 
percentage for Class 1 (Scotch) and Class 3 (Native) spearmint oil of 
760,660 pounds and 35 percent, and 1,307,947 pounds and 53 percent, 
respectively. The Committee also unanimously set its 2018-2019 
marketing year trade demand estimate for Far West Scotch spearmint oil 
at 850,000 pounds, and for Far West Native spearmint oil at 1,306,605 
pounds. Salable quantities and allotment percentages have been placed 
into effect each season since the Order's inception in 1980.

Class 1 (Scotch) Spearmint Oil

    The Committee's recommended 2018-2019 marketing year salable 
quantity and allotment percentage for Far West Scotch spearmint oil 
represent a decrease from the previous year's volume restrictions. The 
proposed 2018-2019 salable quantity of 760,660 pounds is 13,985 pounds 
less than the 2017-2018 salable quantity of 774,645 pounds. The 
producer allotment, recommended at 35 percent for the 2018-2019 
marketing year, is slightly less than the 36 percent in effect the 
previous year. The total estimated allotment base for the coming 
marketing year is estimated at 2,173,315 pounds. This figure represents 
a one-percent increase over the 2017-2018 total allotment base of 
2,151,797.
    The Committee considered several factors in making its 
recommendation, including the current and projected supply, estimated 
future demand, production costs, and producer prices. The Committee's 
recommendations also account for declining acreage of Far West Scotch 
spearmint oil, decreasing consumer demand, existing carry-in and 
reserve pool volume, and increasing production in competing markets.
    According to the Committee, as costs of production have increased, 
many producers have forgone new plantings. This has resulted in a 
significant decline in production of Far West Scotch spearmint oil over 
past years. Production has decreased from 1,229,258 pounds produced in 
2015, to 1,113,346 pounds produced in 2016 and, finally, to an 
estimated 817,857 pounds for 2017.
    Industry reports also indicate that the relatively low trade demand 
for Far West spearmint oil is the result of decreased consumer demand 
for spearmint-flavored products, especially chewing gum in China and 
India. Far West Scotch spearmint oil sales have averaged 941,140 pounds 
per year over the last three years and 966,875 pounds over the last 
five years. For the 2017-2018 crop, the Committee estimated trade 
demand at 800,000 pounds.
    In addition, increasing production of spearmint oil in competing 
markets, most notably Canada and the U.S. Midwest, has also put 
downward pressure on the Far West Scotch market.
    Given the general decline in demand and anticipated market 
conditions for the coming year, the Committee decided it was prudent to 
anticipate 2018-2019 trade demand at 850,000 pounds. Should the 
proposed volume regulation levels prove insufficient to adequately 
supply the market, the Committee has the authority to recommend intra-
seasonal increases, as in previous marketing years.
    The Committee calculated the minimum salable quantity of Far West 
Scotch spearmint oil that would be required during the 2018-2019 
marketing year by subtracting the estimated salable carry-in on June 1, 
2018, (215,757) from the estimated trade demand (850,000), resulting in 
634,243 pounds. This salable quantity represents the minimum amount of 
Scotch spearmint oil that may be needed to satisfy estimated demand for 
the coming year. The Committee then factored in a projected 2019-2020 
carry-in of 126,417 pounds to arrive at a recommended 2018-2019 salable 
quantity of 760,660 pounds.
    The recommended salable quantity of 760,660 pounds combined with an 
estimated 215,757 pounds of salable quantity (salable carry-in) from 
the previous year would yield a total available supply of 976,417 
pounds Far West Scotch spearmint oil for the 2018-2019 marketing year. 
The recommended amount would adequately supply the Committee's 
estimated market demand of 850,000 pounds for the 2018-2019 marketing 
year and would result in a desired 2019-2020 carry-in of 126,417 
pounds.
    Salable carry-in is the primary measure of excess spearmint oil 
supply under the Order, as it represents overproduction in prior years 
that is currently available to the market without restriction. Under 
volume regulation, spearmint oil that is designated as salable 
continues to be available to the market until it is sold and may be 
marketed at any time at the discretion of the owner. Salable quantities 
established under volume regulation over the last three seasons have 
exceeded sales, leading to a gradual build of Far West Scotch spearmint 
oil salable carry-in.
    The Committee estimates that there will be 215,757 pounds of 
salable carry-in of Scotch spearmint oil on June 1, 2018. If current 
market conditions are maintained and the Committee's projections are 
correct, salable carry-in will decrease to 126,417 pounds at the 
beginning of the 2019-2020 marketing year. This level would be slightly 
below the quantity that the Committee considers favorable (generally 
150,000 pounds). However, the Committee believes that this lower 
salable carry-in will be manageable given the expected production level 
of Far West Scotch spearmint oil in the current marketing year and the 
quantity of oil held in the reserve pool.
    Spearmint oil held in reserve is oil that has been produced in 
excess of a producer's marketing year allotment. Oil held in the 
reserve pool is a less reliable indicator of excess supply as it is not 
available to the market in the current marketing year without an 
increase in the salable quantity and allotment percentage.
    Far West Scotch spearmint oil held in the reserve pool, which was 
completely depleted at the beginning of the 2014-2015 marketing year, 
has also been gradually increasing over the past four years. The 
Committee reported that there were 71,088 pounds of Far West Scotch 
spearmint oil held in the reserve pool as of May 31, 2017. The 
Committee estimates the reserve pool will increase to 114,274 pounds by 
May 31, 2018. This quantity of reserve pool oil should be an adequate 
buffer to supply the market, if necessary, if the industry experiences 
an unexpected increase in demand.
    The Committee recommends a producer allotment percentage of 35 
percent for the 2018-2019 marketing year. During its October 25, 2017, 
meeting, the Committee calculated an initial producer allotment 
percentage by dividing the minimum required salable quantity (634,243 
pounds) by the total

[[Page 14768]]

estimated allotment base (2,173,315 pounds), resulting in 29.2 percent. 
However, producers and handlers at the meeting indicated that the 
computed percentage (29.2 percent) might not adequately supply the 
potential 2018-2019 Scotch spearmint oil market demand or may result in 
inadequate carry-in for the subsequent marketing year. After 
deliberation, the Committee increased the targeted producer allotment 
percentage to 35 percent. The total estimated allotment base (2,173,315 
pounds) for the 2018-2019 marketing year multiplied by the recommended 
salable allotment percentage (35 percent) yields 760,660 pounds, which 
is also the recommended salable quantity for the 2018-2019 marketing 
year.
    The 2018-2019 marketing year computational data for the Committee's 
recommendations is further outlined below.
    (A) Estimated carry-in of Scotch spearmint oil on June 1, 2018: 
215,757 pounds. This figure is the difference between the 2017-2018 
marketing year total available supply of 1,015,757 pounds and the 2017-
2018 marketing year estimated trade demand of 800,000 pounds.
    (B) Estimated trade demand of Far West Scotch spearmint oil for the 
2018-2019 marketing year: 850,000 pounds. This figure was established 
at the Committee meeting held on October 25, 2017.
    (C) Salable quantity of Scotch spearmint oil required from the 
2018-2019 marketing year production: 634,243 pounds. This figure is the 
difference between the estimated 2018-2019 marketing year trade demand 
(850,000 pounds) and the estimated carry-in on June 1, 2018 (215,757 
pounds). This salable quantity represents the minimum amount of Scotch 
spearmint oil production that may be needed to satisfy estimated demand 
for the coming year.
    (D) Total estimated allotment base of Scotch spearmint oil for the 
2018-2019 marketing year: 2,173,315 pounds. This figure represents a 
one-percent increase over the 2017-2018 total actual allotment base of 
2,151,797 pounds as prescribed in Sec.  985.53(d)(1). The one-percent 
increase equals 21,518 pounds of Scotch spearmint oil. This total 
estimated allotment base is generally revised each year on June 1 in 
accordance with Sec.  985.53(e).
    (E) Computed Scotch spearmint oil allotment percentage for the 
2018-2019 marketing year: 29.2 percent. This percentage is computed by 
dividing the minimum required salable quantity (634,243 pounds) by the 
total estimated allotment base (2,173,315 pounds).
    (F) Recommended Scotch spearmint oil allotment percentage for the 
2018-2019 marketing year: 35 percent. This is the Committee's 
recommendation and is based on the computed allotment percentage (29.2 
percent) and input from producers and handlers at the October 25, 2017, 
meeting. The recommended 35 percent allotment percentage reflects the 
Committee's belief that the computed percentage (29.2 percent) may not 
adequately supply anticipated 2018-2019 Scotch spearmint oil market 
demand.
    (G) Recommended Scotch spearmint oil salable quantity for the 2018-
2019 marketing year: 760,660 pounds. This figure is the product of the 
recommended salable allotment percentage (35 percent) and the total 
estimated allotment base (2,173,315 pounds) for the 2018-2019 marketing 
year.
    (H) Estimated total available supply of Scotch spearmint oil for 
the 2018-2019 marketing year: 976,417 pounds. This figure is the sum of 
the 2018-2019 recommended salable quantity (760,660 pounds) and the 
estimated carry-in on June 1, 2018 (215,757 pounds).
    For the reasons stated above, the Committee believes that the 
recommended salable quantity would adequately meet demand, would result 
in a reasonable carry-in for the following year, and would contribute 
to orderly marketing conditions as intended under the Order.

Class 3 (Native) Spearmint Oil

    The Committee recommended a Native spearmint oil salable quantity 
of 1,307,947 pounds and an allotment percentage of 53 percent for the 
2018-2019 marketing year. These figures are, respectively, 206,955 
pounds and 9 percentage points less than the final levels established 
for the 2017-2018 marketing year after an intra-seasonal increase.
    The Committee utilized handlers' anticipated sales estimates of Far 
West Native spearmint oil for the coming year, historical and current 
Native spearmint oil production, inventory statistics, and 
international market data obtained from consultants for the spearmint 
oil industry to arrive at these recommendations.
    The Committee anticipates that 2017 production will total 1,462,976 
pounds, down from 1,694,684 pounds in 2016. Committee figures show that 
declining production is the result of a 1,107-acre year-over-year 
reduction in total Native spearmint acres, and an average yield per 
acre drop from 166.2 pounds per acre in 2016 to 160.9 pounds per acre 
in 2017. Conversely, sales of Native spearmint oil have been increasing 
at about a 4 percent rate from the 2015-2016 season through the 2017-
2018 marketing year.
    The Committee expects that 57,968 pounds of salable Native 
spearmint oil from prior years will be carried into the 2018-2019 
marketing year. This amount is down from the estimated 143,011 pounds 
of salable Native spearmint oil carried into the 2017-2018 marketing 
year, and 142,657 pounds carried into the 2016-2017 marketing year.
    Further, the Committee estimates that there will be 1,237,237 
pounds of Native spearmint oil in the reserve pool at the beginning of 
the 2018-2019 marketing year. This figure is 142,578 pounds higher than 
the quantity of reserve pool oil held by producers the previous year 
and is in line with the gradual increase in reserves over the past 
three marketing years.
    Exports of Far West Native spearmint oil, as of July 2017, are 
above their five-year average. Canada, India, and China are the largest 
destination markets for Far West Native spearmint oil exports. As a 
common practice, large end users often buy spearmint oil to build 
reserve stocks when prices are low as a hedge against future price 
increases. End users of Native spearmint oil are expected to continue 
to rely on Far West production as their main source of high quality 
Native spearmint oil, but demand may be at lower quantities moving 
forward in response to long-term market factors. A sharp spike in 
demand for Far West Native spearmint oil was experienced by handlers 
late in the 2017-2018 marketing year, spurred by the popularity of a 
new product in the market. This sharp spike in demand caused the 
remaining available 2017-2018 salable quantity of Native oil to be 
depleted.
    The Committee estimates the 2018-2019 marketing year Native 
spearmint oil trade demand to be 1,306,605 pounds. This figure is based 
on input provided by producers at six Native spearmint oil production 
area meetings held in mid-October 2017, as well as estimates provided 
by handlers and other meeting participants at the October 25, 2017, 
meeting. This figure represents an increase of 56,605 pounds from the 
previous year's initial estimate. The average estimated trade demand 
for Native spearmint oil from the six production area grower's meetings 
was 1,349,379 pounds, whereas the handlers' estimates ranged from 
1,350,000 to 1,500,000 pounds. The average of Far West Native spearmint 
oil sales over the last three years is also

[[Page 14769]]

1,305,605 pounds. However, the quantity marketed over the most recent 
full marketing year, 2016-2017, was 1,287,691 pounds. The Committee 
chose to be slightly conservative in the establishment of its trade 
demand estimate for the 2018-2019 marketing year to avoid oversupplying 
the market.
    The estimated 2018-2019 carry-in of 57,968 pounds of Native 
spearmint oil plus the recommended salable quantity of 1,307,947 pounds 
would result in an estimated total available supply of 1,365,915 pounds 
of Native spearmint oil during the 2018-2019 marketing year. With the 
corresponding estimated trade demand of 1,306,605 pounds, the Committee 
projects that 59,310 pounds of Native spearmint oil will be carried 
into the 2019-2020 marketing year, resulting in a slight increase of 
1,342 pounds year-over-year. The Committee estimates that there will be 
1,237,237 pounds of Native spearmint oil held in the reserve pool at 
the beginning of the 2018-2019 marketing year. Should the industry 
experience an unexpected increase in trade demand, Native spearmint oil 
in the reserve pool could be released to satisfy that demand.
    The Committee recommends a producer allotment percentage of 53 
percent for the 2018-2019 marketing year. During its October 25, 2017, 
meeting, the Committee calculated an initial producer allotment 
percentage by dividing the minimum required salable quantity (1,248,637 
pounds) by the total estimated allotment base (2,467,825 pounds), 
resulting in 50.6 percent. However, producers and handlers at the 
meeting expressed that the computed percentage (50.6 percent) may not 
adequately supply the potential 2018-2019 Native spearmint oil market 
demand or result in adequate carry-in for the subsequent marketing 
year. After deliberation, the Committee increased the targeted producer 
allotment percentage to a recommended 53 percent. The total estimated 
allotment base (2,467,825 pounds) for the 2018-2019 marketing year 
multiplied by the recommended salable allotment percentage (53 percent) 
yields 1,307,947 pounds, which is also the recommended salable quantity 
for that year.
    The 2018-2019 marketing year computational data for the Committee's 
recommendations is further outlined below.
    (A) Estimated carry-in of Native spearmint oil on June 1, 2018: 
57,968 pounds. This figure is the difference between the revised 2017-
2018 marketing year total available supply of 1,657,968 pounds and the 
revised 2017-2018 marketing year estimated trade demand of 1,600,000 
pounds.
    (B) Estimated trade demand of Native spearmint oil for the 2018-
2019 marketing year: 1,306,605 pounds. This estimate was established by 
the Committee at the October 25, 2017, meeting.
    (C) Salable quantity of Native spearmint oil required from the 
2018-2019 marketing year production: 1,248,637 pounds. This figure is 
the difference between the estimated 2018-2019 marketing year estimated 
trade demand (1,306,605 pounds) and the estimated carry-in on June 1, 
2018 (57,968 pounds). This is the minimum amount of Native spearmint 
oil that the Committee believes would be required to meet the 
anticipated 2018-2019 marketing year trade demand.
    (D) Total estimated allotment base of Native spearmint oil for the 
2018-2019 marketing year: 2,467,825 pounds. This figure represents a 
one-percent increase over the 2017-2018 total actual allotment base of 
2,443,391 pounds as prescribed in Sec.  985.53(d)(1). The one-percent 
increase equals 24,434 pounds of Native spearmint oil. This estimate 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).
    (E) Computed Native spearmint oil allotment percentage for the 
2018-2019 marketing year: 50.6 percent. This percentage is calculated 
by dividing the required salable quantity (1,248,637 pounds) by the 
total estimated allotment base (2,467,825 pounds) for the 2018-2019 
marketing year.
    (F) Recommended Native spearmint oil allotment percentage for the 
2018-2019 marketing year: 53 percent. This is the Committee's 
recommendation based on the computed allotment percentage (50.6 
percent) and input from producers and handlers at the October 25, 2017, 
meeting. The recommended 53 percent allotment percentage is also based 
on the Committee's belief that the computed percentage (50.6 percent) 
may not adequately supply the potential market for Native spearmint oil 
in the 2018-2019 marketing year.
    (G) Recommended Native spearmint oil 2018-2019 marketing year 
salable quantity: 1,307,947 pounds. This figure is the product of the 
recommended allotment percentage (53 percent) and the total estimated 
allotment base (2,467,825 pounds). After completely depleting the 
remaining salable quantity for the 2017-2018 marketing year, to prevent 
this from happening again, the Committee recommended that the 2018-2019 
salable quantity be set at a level slightly higher than the estimated 
trade demand for the same year (1,306,605 pounds).
    (H) Estimated available supply of Native spearmint oil for the 
2018-2019 marketing year: 1,365,915 pounds. This figure is the sum of 
the 2018-2019 recommended salable quantity (1,307,947 pounds) and the 
estimated carry-in on June 1, 2018 (57,968 pounds).
    The Committee's recommended Scotch and Native spearmint oil salable 
quantities and allotment percentages of 760,660 pounds and 35 percent, 
and 1,307,947 pounds and 53 percent, respectively, would match the 
available supply of each class of spearmint oil to the estimated demand 
of each, thus avoiding extreme fluctuations in inventories and prices. 
This proposal, if adopted, would be similar to regulations issued in 
prior seasons.
    The salable quantities in this proposal are not expected to cause a 
shortage of spearmint oil supplies. Any unanticipated or additional 
market demand for spearmint oil which may develop during the marketing 
year could be satisfied by an intra-seasonal increase in the salable 
quantity. The Order contains a provision in Sec.  985.51 for intra-
seasonal increases to allow the Committee the flexibility to respond 
quickly to changing market conditions.
    Under volume regulation, producers who produce more than their 
annual allotments during the marketing year may transfer such excess 
spearmint oil to producers who have produced less than their annual 
allotment. In addition, on December 1 of each year, producers who have 
not transferred their excess spearmint oil to other producers must 
place their excess spearmint oil production into the reserve pool to be 
released in the future in accordance with market needs and under the 
Committee's direction.
    In conjunction with the issuance of this proposed rule, USDA has 
reviewed the Committee's marketing policy statement for the 2018-2019 
marketing year. The Committee's marketing policy statement, a 
requirement whenever the Committee recommends volume regulation, meets 
the requirements of Sec. Sec.  985.50 and 985.51.
    The establishment of the proposed salable quantities and allotment 
percentages would allow for anticipated market needs. In determining 
anticipated market needs, the Committee considered historical sales, as 
well as changes and trends in production and demand. This proposal 
would also provide producers with information on the amount of 
spearmint oil that should be produced for the 2018-2019 season to meet 
anticipated market demand.

[[Page 14770]]

Initial Regulatory Flexibility Act

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this proposed rule on small 
entities. Accordingly, AMS has prepared this initial regulatory 
flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses 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.
    There are approximately 43 producers and 94 producers of Scotch and 
Native spearmint oil, respectively, in the regulated production area 
and approximately seven spearmint oil handlers subject to regulation 
under the Order. Small agricultural service firms are defined by the 
Small Business Administration (SBA) as those having annual receipts of 
less than $7,500,000, and small agricultural producers are defined as 
those having annual receipts of less than $750,000 (13 CFR 121.201).
    The Committee reported that recent producer prices for spearmint 
oil range from $15.50 to $18.00 per pound. The National Agricultural 
Statistics Service (NASS) reported that the 2016 U.S. season average 
spearmint oil grower price per pound was $17.40. Multiplying $17.40 per 
pound by 2016-17 spearmint oil utilization of 2,168,257 million pounds 
yields a crop value estimate of about $37.7 million. Total 2016-17 
spearmint oil utilization, reported by the Committee, is 958,711 pounds 
and 1,209,546 pounds for Scotch and Native spearmint oil, respectively.
    Given the accounting requirements for the volume regulation 
provisions of the Order, the Committee maintains accurate records of 
each producer's production and sales. Using the $17.40 average 
spearmint oil price, and Committee production data for each producer, 
the Committee estimates that 38 of the 43 Scotch spearmint oil 
producers and 88 of the 94 Native spearmint oil producers could be 
classified as small entities under the SBA definition.
    There is no third party or governmental entity that collects and 
reports spearmint oil prices received by spearmint oil handlers. 
However, the Committee estimates an average spearmint oil handling 
markup at approximately 20 percent of the price received by producers. 
Multiplying 1.20 by the 2016 producer price of $17.40 yields a handler 
f.o.b. price per pound estimate of $20.88.
    Multiplying this handler f.o.b price by spearmint oil utilization 
of 2,168,257 pounds results in an estimated handler-level spearmint oil 
value of $45.3 million. Dividing this figure by the number of handlers 
(7) yields estimated average annual handler receipts of about $6.5 
million, which is below the SBA threshold for small agricultural 
service firms.
    Using confidential data on pounds handled by each handler, and the 
abovementioned handler price per pound, the Committee reported that it 
is likely that at least two of the seven handlers had 2016-2017 
marketing year spearmint oil sales value that exceeded the SBA 
threshold.
    Therefore, in view of the foregoing, the majority of producers and 
handlers of spearmint oil may be classified as small entities.
    This proposed rule would establish the quantity of spearmint oil 
produced in the Far West, by class, which handlers may purchase from, 
or handle on behalf of, producers during the 2018-2019 marketing year. 
The Committee recommended this action to help maintain stability in the 
spearmint oil market by matching supply to estimated demand, thereby 
avoiding extreme fluctuations in supplies and prices. Establishing 
quantities that may be purchased or handled during the marketing year 
through volume regulations allows producers to coordinate their 
spearmint oil production with the expected market demand. Authority for 
this proposal is provided in Sec. Sec.  985.50, 985.51, and 985.52.
    The Committee estimated trade demand for the 2018-2019 marketing 
year for both classes of oil at 2,156,605 pounds and expects that the 
combined salable carry-in will be 273,725 pounds. The combined required 
salable quantity is 1,882,880 pounds. Under volume regulation, total 
sales of spearmint oil by producers for the 2018-2019 marketing year 
would be held to 2,342,332 pounds (the recommended salable quantity for 
both classes of spearmint oil of 2,068,607 pounds plus 273,725 pounds 
of carry-in). This total available supply of 2,342,332 pounds should be 
more than adequate to supply the 2,156,605 pounds of anticipated total 
trade demand for spearmint oil. In addition, as of May 31, 2017, the 
total reserve pool for both classes of spearmint oil stood at 1,067,138 
pounds. Furthermore, that quantity is expected to rise over the course 
of the 2017-2018 marketing year. Should trade demand increase 
unexpectedly during the 2018-2019 marketing year, reserve pool 
spearmint oil could be released into the market to supply that increase 
in demand.
    The recommended allotment percentages, upon which 2018-2019 
producer allotments are based, are 35 percent for Scotch spearmint oil 
and 53 percent for Native spearmint oil. Without volume regulation, 
producers would not be held to these allotment levels, and could 
produce and sell unrestricted quantities of spearmint oil. The USDA 
econometric model estimated that the season average producer price per 
pound (from both classes of spearmint oil) would decline about $1.90 
per pound because of the higher quantities of spearmint oil that would 
be produced and marketed without volume regulation. The surplus 
situation for the spearmint oil market that would exist without volume 
regulation in 2018-2019 also would likely dampen prospects for improved 
producer prices in future years because of the buildup in stocks.
    The use of volume regulation allows the industry to fully supply 
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume regulation is believed to 
have little or no effect on consumer prices of products containing 
spearmint oil and would not result in fewer retail sales of such 
products.
    The Committee discussed alternatives to the recommendations 
contained in this rule for both classes of spearmint oil. The Committee 
discussed and rejected the idea of not regulating any volume for either 
class of spearmint oil because of the severe, price-depressing effects 
that would likely occur without volume regulation. The Committee also 
discussed and considered salable quantities and allotment percentages 
that were above and below the levels that were ultimately recommended 
for both classes of spearmint oil. Ultimately, the action taken by the 
Committee was to decrease the salable quantity and allotment percentage 
for Class 1 (Scotch) spearmint oil, and to increase the salable 
quantity and allotment percentage Class 3 (Native) spearmint oil from 
the 2017-2018 marketing year levels.
    As noted earlier, the Committee's recommendation to establish 
salable quantities and allotment percentages for both classes of 
spearmint oil was made after careful consideration of all available 
information including: (1) The estimated quantity of salable oil of 
each class held by producers and handlers;

[[Page 14771]]

(2) the estimated demand for each class of oil; (3) the prospective 
production of each class of oil; (4) the 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.
    Based on its review, the Committee believes that the salable 
quantities and allotment percentages recommended would achieve the 
objectives sought. The Committee also believes that, should there be no 
volume regulation in effect for the upcoming marketing year, the Far 
West spearmint oil industry would return to the pronounced cyclical 
price patterns that occurred prior to the promulgation of the Order. As 
previously stated, annual salable quantities and allotment percentages 
have been issued for both classes of spearmint oil since the Order's 
inception. The salable quantities and allotment percentages proposed 
herein are expected to facilitate the goal of maintaining orderly 
marketing conditions for Far West spearmint oil for the 2018-2019 and 
future marketing years.
    Costs to producers and handlers, large and small, resulting from 
this proposal are expected to be offset by the benefits derived from a 
more stable market and increased returns. The benefits of this rule are 
expected to be equally available to all producers and handlers 
regardless of their size.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the Order's information collection requirements have been 
previously approved by OMB and assigned OMB No. 0581-0178, Specialty 
Crops Program. No changes are necessary in those requirements as a 
result of this action. Should any changes become necessary, they would 
be submitted to OMB for approval.
    This proposed rule would establish the salable quantities and 
allotment percentages for Class 1 (Scotch) spearmint oil and Class 3 
(Native) spearmint oil produced in the Far West during the 2018-2019 
marketing year. Accordingly, this proposal would not impose any 
additional reporting or recordkeeping requirements on either small or 
large spearmint oil producers or 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.
    AMS is committed to complying 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.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this proposed rule.
    In addition, 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 on all issues. Like all Committee meetings, the October 
25, 2017, meeting was a public meeting and all entities, both large and 
small, were able to express views on this issue. Finally, interested 
persons are invited to submit comments on this proposed rule, including 
the regulatory and informational impacts of this action on small 
businesses.
    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/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Richard Lower at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    A 60-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments timely received will be 
considered before a final determination is made on this matter.

List of Subjects in 7 CFR Part 985

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

    For the reasons set forth in the preamble, 7 CFR part 985 is 
proposed to be amended as follows:

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

0
1. The authority citation for 7 CFR part 985 continues to read as 
follows:

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

0
2. Revise Sec.  985.233 to read as follows:


Sec.  985.233  Salable quantities and allotment percentages.

    The salable quantity and allotment percentage for each class of 
spearmint oil during the marketing year beginning on June 1, 2018, 
shall be as follows:
    (a) Class 1 (Scotch) oil--a salable quantity of 760,660 pounds and 
an allotment percentage of 35 percent.
    (b) Class 3 (Native) oil--a salable quantity of 1,307,947 pounds 
and an allotment percentage of 53 percent.


Sec.  985.234   [Removed].


Sec.  985.235   [Removed].

0
3. Remove Sec. Sec.  985.234 and 985.235.

    Dated: April 2, 2018
Bruce Summers,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2018-06973 Filed 4-5-18; 8:45 am]
 BILLING CODE 3410-02-P