[Federal Register Volume 89, Number 131 (Tuesday, July 9, 2024)]
[Proposed Rules]
[Pages 56234-56237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14937]


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 Proposed Rules
                                                 Federal Register
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 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.
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  Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / 
Proposed Rules  

[[Page 56234]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1210

[Doc. No. AMS-SC-24-0020]


Watermelon Research and Promotion Plan; Increased Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rulemaking would implement a recommendation from 
the National Watermelon Promotion Board to increase the assessment rate 
from six cents per hundredweight to nine cents per hundredweight. 
Domestic watermelon producers of 10 acres or more and domestic first 
handlers of watermelons would each pay four and a half cents per 
hundredweight, and importers of 150,000 pounds or more annually of 
watermelons would pay nine cents per hundredweight. This proposed 
rulemaking would also amend current regulatory language to correct non-
substantive and typographical errors.

DATES: Comments must be received by August 8, 2024.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rulemaking. Comments may be mailed to the 
Docket Clerk, Market Development Division, Specialty Crops Program, 
Agricultural Marketing Service, U.S. Department of Agriculture, 1400 
Independence Avenue SW, Room 1406-S, STOP 0244, Washington, DC 20250-
0237; submitted by Email: SM.USDA.MRP.AMS .[email protected]; or via 
internet at https://www.regulations.gov. Comments should reference the 
document number and the date and page number of this issue of the 
Federal Register. Comments submitted in response to this proposed 
rulemaking will be included in the record and will be made available to 
the public and can be viewed at: https://www.regulations.gov. 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: William Hodges, Marketing Specialist, 
Market Development Division, Specialty Crops Program, AMS, USDA, 1400 
Independence Avenue SW, Room 1406-S, STOP 0244, Washington, DC 20250-
0244; Telephone: (443) 571-8456; or Email: [email protected].

SUPPLEMENTARY INFORMATION: This proposed rulemaking affecting the 
Watermelon Research and Promotion Plan (7 CFR part 1210) (Plan) is 
authorized by the Watermelon Research and Promotion Act (7 U.S.C. 4901-
4916) (Act).

Executive Orders 12866, 13563 and 14094

    The Agricultural Marketing Service (AMS) is issuing this proposed 
rulemaking in conformance with Executive Orders 12866, 13563, and 
14094. Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 14094 reaffirms, supplements, and updates Executive 
Order 12866 and further directs agencies to solicit and consider input 
from a wide range of affected and interested parties through a variety 
of means. This proposed rulemaking is not a significant regulatory 
action within the meaning of Executive Order 12866. Accordingly, this 
action has not been reviewed by the Office of Management and Budget 
under sec. 6 of the Executive order.

Executive Order 13175

    This proposed action has been reviewed in accordance with the 
requirements of Executive Order 13175, Consultation and Coordination 
with Indian Tribal Governments, which requires agencies to consider 
whether their rulemaking actions would have Tribal implications. AMS 
has determined that this proposed rulemaking is unlikely to have 
substantial direct effects on one or more Indian Tribes, or the 
relationship between the Federal Government and Indian Tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian Tribes.

Executive Order 12988

    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. It is not intended to have retroactive effect. The Act 
provides that it shall not affect or preempt any other Federal or State 
law authorizing promotion or research relating to an agricultural 
commodity.
    Under sec. 1650 of the Act (7 U.S.C. 4909), a person may 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.

Background

    Under the Plan, the National Watermelon Promotion Board (Board) 
administers a nationally coordinated program of research, development, 
advertising, and promotion designed to strengthen the position of 
watermelons in the marketplace, and to establish, maintain, and expand 
markets for watermelons. To administer the program, Sec. Sec.  1210.328 
and 1210.341 of the Plan authorize the Board, with the approval of AMS, 
to formulate an annual budget of expenses and collect assessments on 
domestic producers growing 10 acres or more of watermelons, domestic 
first handlers of watermelons, and importers of 150,000 or more pounds 
of watermelons per year. The Board is familiar with both the

[[Page 56235]]

program's needs and the rising costs of research and promotion 
initiatives and are able to formulate an appropriate budget and 
assessment rate.
    Currently, in accordance with the Plan, domestic watermelon 
producers of 10 acres or more and domestic first handlers of 
watermelons each pay three cents per hundredweight, and importers of 
150,000 pounds or more annually of watermelons pay six cents per 
hundredweight. The Plan specifies that handlers are responsible for 
collecting and submitting both the producer and handler assessments to 
the Board, reporting their handling of watermelons, and maintaining 
records necessary to verify their reporting(s). Importers are 
responsible for payment of assessments to the Board on watermelons 
imported into the United States through the U.S. Customs Service and 
Border Protection. The current assessment rate for watermelon 
producers, handlers, and importers was established in 2008.
    The Board recommended increasing the current assessment rate to 
address inflation's impact on buying power while maintaining its 
competitiveness in the marketplace.

Board Recommendation To Adjust the Assessment Rate

    This proposed rulemaking would amend Sec.  1210.515 of the Plan by 
increasing the assessment rate from six cents per hundredweight to nine 
cents per hundredweight. The assessment on domestic watermelon 
producers of 10 acres or more and domestic first handlers of 
watermelons would increase from three cents per hundredweight to four 
and a half cents per hundredweight, and the assessment on importers of 
150,000 pounds or more annually of watermelons would increase from six 
cents per hundredweight to nine cents per hundredweight.
    The Board discussed this recommendation over several months at 
various State and regional watermelon association meetings in addition 
to presenting at a public town hall meeting on February 23, 2024, at 
the National Watermelon Association's (NWA) annual convention. The 
Board sent out postcards to all industry contacts in their database to 
invite them to the NWA town hall meeting and provide information on the 
proposed assessment increase. The Board met on February 24, 2024, and 
voted unanimously to propose the assessment increase from six cents to 
nine cents per hundredweight of watermelons. Board members present for 
the vote represented domestic producers and first handlers, as well as 
importers.
    From 2008 to 2023, according to the Board, the United States 
experienced inflation of 43.7%, which equates to 2.3% when compounded 
annually. This dollar devaluation translates to a loss in buying power 
of roughly 30% since the previous assessment increase was instituted in 
2008. The erosion of buying power and continued inflationary pressure 
on funds limit the Board's research and promotion activities. The 
proposed change would further support the Board's goal of a balanced 
budget beginning in 2025, while still allowing for increased research 
and promotion of watermelon across the Board's communication, 
marketing, foodservice, and research committees.
    Section 1210.341 of the Plan states, in part, that in the case of 
an importer, the assessment shall be equal to the combined rate for 
domestic producers and handlers and shall be paid by the importer at 
the time of entry of the watermelons into the United States. 
Accordingly, with the proposed increased assessment rate of nine cents 
per hundredweight, domestic watermelon producers of 10 acres or more 
and domestic first handlers of watermelons would each pay four and a 
half cents per hundredweight, and importers of 150,000 pounds or more 
annually of watermelons would pay nine cents per hundredweight. This 
proposed increase is consistent with sec. 1647(f) of the Act that 
permits changes in the assessment rate through notice and comment 
procedures. Section 1210.341(b) of the Plan states that assessment 
rates shall be fixed by the Secretary in accordance with sec. 1647(f) 
of the Act. Further, not more than one assessment on a producer, 
handler, or importer may be collected on any lot of watermelons. 
Accordingly, if this proposed rulemaking was finalized, Sec.  
1210.515(a) of the Plan would be revised to reflect the recommendation 
of the Board as it relates to assessments.

Amend Current Regulatory Language

    This proposed rulemaking also includes proposed changes to Sec.  
1210.515(b) of the Plan to amend language and make non-substantive 
corrections to the text. These proposed edits are administrative 
changes and would not have an impact on the assessment rate. The 
proposed edits would: amend the misspelling of ``scheudle'' to 
``schedule''; amend ``U.S. Customs Service (USCS)'' to ``U.S. Customs 
Service and Border Protection (Customs)''; amend ``USCS'' to 
``Customs'' and amend ``of any other'' to ``or any other''. The 
proposal would also add clarifying language and amend ``may submit the 
Board'' to ``may submit to the Board''.

Initial Regulatory Flexibility Act and Paperwork Reduction Act

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) [5 U.S.C. 601 et seq.], AMS has considered the economic 
impact of this action on the small producers, handlers, and importers 
that would be affected by this proposed rulemaking. The purpose of the 
RFA is to fit regulatory action to scale on businesses subject to such 
action so that small businesses will not be disproportionately 
burdened.
    Domestic producers of less than 10 acres of watermelons are exempt 
from this program. Importers of less than 150,000 pounds of watermelons 
per year are also exempt. According to the Board, there are 
approximately 429 producers, 121 first handlers, and 183 importers who 
are subject to the provisions of the Plan.
    The Small Business Administration (SBA) defines, in 13 CFR part 
121, small agricultural producers of watermelons as those having annual 
receipts equal to or less than $3.75 million [NAICS code 111219--Other 
Vegetable (except Potato) and Melon Farming] and small agricultural 
service firms (handlers and importers) as those having annual receipts 
equal to or less than $34.0 million [NAICS code -111514--Postharvest 
Crop Activities (except Cotton Ginning)]. Under these definitions, the 
majority of the producers, handlers, and importers that would be 
affected by this proposed rulemaking would be considered small 
entities. This conclusion is based on following computations and data, 
using the current Board assessment rate of six cents per hundredweight.
    For 2023, National Agricultural Statistics Service (NASS) reported 
a season average producer price per pound of $0.214. The Board 
estimated the Freight on Board (FOB) price to be $0.284 for both 
importers and handlers in 2023. The Board reported that 2023 
assessments received from domestic entities totaled $2.247 million, 
with equal proportions of $1.1235 million coming from producers and 
handlers. Dividing $1.1235 million by half of the current assessment 
rate of $0.06 per hundredweight, as producers and handlers evenly split 
the assessment, yields an estimate of total producer pounds assessed of 
3,745.0 million ($1.1235 million divided by $0.0003 per pound). 
Dividing the total pounds assessed quantity by 429 producers yields an 
average assessed pounds per producer estimate of 8.73 million.

[[Page 56236]]

Multiplying the annual assessed pounds per producer estimate of 8.73 
million pounds by the 2023 NASS season average producer price per pound 
of $0.214 yields an average annual watermelon sales receipts per 
producer estimate of $1.87 million. This is well below the SBA small 
producer size threshold of $3.75 million.
    With an equal proportion of annual domestic assessments coming from 
handlers, the total handler pounds assessed is also 3,745.0 million. 
Dividing total handler pounds assessed by 121 handlers yields an 
average assessed pounds per handler estimate of 30.95 million pounds. 
Multiplying this estimate of annual assessed pounds per handler of 
30.95 million pounds by the season average handler price per pound of 
$0.284, provided by the Board, yields an estimate of average annual 
watermelon sales receipts per handler of $8.79 million. This is well 
below the SBA small handler size threshold of $34.0 million.
    The Board reported that assessments received from importers totaled 
$1.196 million in 2023. Dividing $1.196 million by the current 
assessment rate of $0.06 per hundredweight ($0.0006 per pound) yields 
an estimate of total importer pounds assessed of 1,993.3 million. 
Dividing the total pounds assessed by the number of importers, 183, 
yields an average assessed pounds per importer estimate of 10.89 
million. Multiplying this estimate of annual assessed pounds per 
importer of 10.89 million pound by the season average importer price 
per pound of $0.284 yields an estimate of average annual watermelon 
sales receipts per importer of $3.09 million. This is well below the 
SBA small importer size threshold of $34.0 million. Assuming normal 
distributions, the majority of producers, handlers, and importers would 
be classified as small businesses according to SBA size standards.
    Under the current Plan, domestic watermelon producers of 10 acres 
or more and domestic first handlers of watermelon each pay a mandatory 
assessment rate of three cents per hundredweight, and importers of more 
than 150,000 pounds or more annually of watermelons pay an assessment 
of six cents per hundredweight. Assessments under the program are used 
by the Board to finance promotion, research, and educational programs 
designed to increase consumer demand for watermelons in the United 
States and international markets. The six cents per hundredweight 
assessment rate on watermelons became effective when the Plan was 
amended in January 2008, which was the only time that the Board 
increased the assessment rate since the inception of the program in 
1989. The Plan is administered by the Board under the U.S. Department 
of Agriculture (USDA) supervision.
    According to the Board, additional revenue is required to sustain 
and expand the promotional, research, and communications programs. The 
Board approved the proposed assessment rate increase at its February 
24, 2024, meeting. This proposed increase is consistent with sec. 
1647(f) of the Act that permits changes in the assessment rate through 
notice and comment procedures. Section 1210.341(b) of the Plan states 
that assessment rates shall be fixed by the Secretary in accordance 
with sec. 1647(f) of the Act. Section 1210.515(a) of the Plan currently 
states that an assessment of three cents per hundredweight shall be 
levied on all watermelons produced, and on all watermelons first 
handled for consumption as human food. It also states that an 
assessment of six cents per hundredweight shall be levied on 
watermelons imported into the United States for consumption as human 
food. Further, not more than one assessment on a producer, handler, or 
importer may be collected on any lot of watermelons. Under this 
proposal, Sec.  1210.515(a) of the Plan would be revised to increase 
the assessment rate from six cents to nine cents per hundredweight. The 
proposal would increase the assessment rate of three cents per 
hundredweight to four and a half cents per hundredweight to be levied 
on all watermelons produced, and on all watermelons first handled for 
consumption as human food in the United States and increase the 
assessment rate from six cents to nine cents per hundredweight to be 
levied on all watermelons imported into the United States for ultimate 
consumption as human food.
    The Board contracted with an independent industry analyst to 
conduct an inflation impact analysis using the Consumer Price Index 
(CPI) published by the U.S. Bureau of Labor Statistics. The base year 
for the analysis was 2008, the year of the last assessment rate 
increase, and the analysis extended through April 2023. The CPI was 
211.080 in January 2008 and 303.363 in April 2023. Dividing 303.363 by 
211.080 yields a ratio of 1.437, or an increase of 43.7 percent. This 
inflation rate equates to 2.3% when compounded annually. Dividing the 
Board's average annual revenue throughout this period of $3,024,721 by 
the CPI change ratio of 1.437 yields a figure of $2,104,601. This 
decline of $920,120 shows the budget's reduced buying power of roughly 
30 percent since the previous assessment increase. This reduction in 
buying power due to inflation has had a significant impact on the 
industry's ability to compete for market share. The cost of media 
services, research programs, promotional opportunities, as well as 
general administrative costs and fees paid to USDA have continually 
risen. USDA's AMS oversight costs were budgeted at $105,000 in 2008, 
compared to $147,000 for 2023. It is AMS policy that all research and 
promotion programs be charged in a fair and equitable manner. 
Assessments collected have not kept pace with these increasing costs. 
Movement and sales of watermelon continue to grow, however, that growth 
has not outpaced the negative effects of inflation.
    Armada Corporate Intelligence conducted a five-year return on 
investment (ROI) study for the Board from 2017-2021, to determine the 
impact of Board activities on the demand for watermelons. The resultant 
ROI for the Board's promotional endeavors is approximately 19:1, which 
displays that the activities of the Board have a significant positive 
impact on the watermelon industry. For further details, the study is 
located at https://www.watermelon.org/press-releases/watermelon-board-announces-significant-positive-impact-for-watermelon-industry-with-191-roi/. Armada Corporate Intelligence's 2021 econometric analysis is 
aligned with prior economic studies developed for the Board, including 
Dr. Harry Kaiser of Cornell University's 2017 analysis.\1\
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    \1\ https://www.watermelon.org/wp-content/uploads/2020/01/Econometric-Evaluation.pdf.
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    With the proposed increase assessment, the financial commitment of 
the US watermelon industry for research and promotion activity would 
increase approximately 50% in current dollars. For example, if we apply 
the proposed assessment increase to 2023, in which collections totaled 
$3,442,105, the increase in assessments collected would have been 
approximately $1,721,053. The Board plans to use the additional funds 
to expand promotion and research activities, maintain operating 
reserves, and to address inflation's impact on buying power.
    The Board estimates the proposed nine cents per hundredweight 
adjustment to the assessment rate would increase the cost to watermelon 
producers and handlers from $12 per truckload of watermelons to $18 per 
truckload of watermelons each. Similarly, the adjusted assessment rate 
will increase the cost to watermelon importers from $24 a truckload to 
$36 a truckload. This is based on a 40,000-

[[Page 56237]]

pound net weight of watermelons per truckload.
    Prior to its recommendation to increase the assessment rate, the 
Board considered three alternative options. First, the Board considered 
maintaining the current assessment rate of six cents per hundredweight. 
However, with no increase to the assessment rate, the Board determined 
many research and promotion programs would be reduced or eliminated to 
balance the budget. Consequently, the alternative of maintaining the 
current assessment rate was rejected.
    The second alternative considered by the Board was a two-cent 
increase to the assessment rate, raising the assessment rate from six 
cents per hundredweight to eight cents per hundredweight. This would 
allow the Board to operate with a balanced budget beginning in 2025, in 
addition to increasing investment in Board promotions. However, the 
Board decided against supporting a two-cent increase as inflationary 
pressure may further limit operations of the Board in coming years.
    The third alternative considered by the Board was a tiered increase 
of the assessment rate with a two-cent increase effective on January 1, 
2025, for a rate of eight cents per hundredweight, and an additional 
one-cent increase effective on January 1, 2026, for a rate of nine 
cents per hundredweight. This option to spread the assessment increase 
over a prolonged period was considered, but the Board ultimately 
decided against this alternative to avoid confusion with concurrent 
annual assessment adjustments.
    This proposed rulemaking would also include administrative changes 
to Sec.  1210.515(b) of the Plan to correct non-substantive and 
typographical errors. These administrative changes would have no impact 
on the assessment rate.
    This proposed rulemaking would not impose additional recordkeeping 
requirements on first handlers, producers, or importers of watermelons. 
Producers of fewer than 10 acres of watermelon and importers of less 
than 150,000 pounds of watermelon annually are exempt. There are no 
Federal rules that duplicate, overlap, or conflict with this proposed 
rulemaking. 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 
proposed rulemaking would not result in a change to the information 
collection and recordkeeping requirements previously approved.
    AMS performed this initial Regulatory Flexibility Analysis 
regarding the impact of this proposed amendment to the Plan on small 
entities, and we invite comments concerning potential effects of this 
amendment on small businesses.
    AMS has determined this proposed rulemaking is consistent with the 
Act and would effectuate its purposes.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments received in response to 
this proposed rulemaking by the date specified will be considered prior 
to finalizing this action.

List of Subjects in 7 CFR Part 1210

    Administrative practice and procedure, Advertising, Agricultural 
research, Consumer information, Marketing agreements, Reporting and 
recordkeeping requirements, Watermelons.

    For the reasons set forth in the preamble, the Agricultural 
Marketing Service proposes to amend 7 CFR part 1210 as follows:

PART 1210--WATERMELON RESEARCH AND PROMOTION PLAN

0
1. The authority citation for part 1210 continues to read as follows:

    Authority:  7 U.S.C. 4901-4916 and 7 U.S.C. 7401.

0
2. Amend Sec.  1210.515 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  1210.515   Levy of assessments.

    (a) An assessment of four and a half cents per hundredweight shall 
be levied on all watermelons produced for ultimate consumption as human 
food, and an assessment of four and a half cents per hundredweight 
shall be levied on all watermelons first handled for ultimate 
consumption as human food. An assessment of nine cents per 
hundredweight shall be levied on all watermelons imported into the 
United States for ultimate consumption as human food at the time of 
entry in the United States.
    (b) The import assessment shall be uniformly applied to imported 
watermelons that are identified by the numbers 0807.11.30 and 
0807.11.40 in the Harmonized Tariff Schedule of the United States or 
any other number used to identify fresh watermelons for consumption as 
human food. The U.S. Customs Service and Border Protection (Customs) 
will collect assessments on such watermelons at the time of entry and 
will forward such assessment as per the agreement between Customs and 
USDA. Any importer or agent who is exempt from payment of assessments 
may submit to the Board adequate proof of the volume handled by such 
importer for the exemption to be granted.
* * * * *

Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2024-14937 Filed 7-8-24; 8:45 am]
BILLING CODE P