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.

Proposed Rules Federal Register

57233

Vol. 69, No. 185

Friday, September 24, 2004

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Parts 1000, 1001, 1005, 1006, 

1007, 1030, 1032, 1033, 1124, 1126, and 

1131 

[Docket No. AO–14–A72, et al.; DA–03–08] 

Milk in the Northeast and Other 

Marketing Areas; Decision on 

Proposed Amendments to Marketing 

Agreements and to Orders

7 CFR part Marketing area AO Nos. 

1001 ..................................................................... Northeast .................................................................................................... AO–14–A72 

1005 ..................................................................... Appalachian ............................................................................................... AO–388–A13 

1006 ..................................................................... Florida ........................................................................................................ AO–356–A36 

1007 ..................................................................... Southeast ................................................................................................... AO–366–A42 

1030 ..................................................................... Upper Midwest ........................................................................................... AO–361–A37 

1032 ..................................................................... Central ........................................................................................................ AO–313–A46 

1033 ..................................................................... Mideast ....................................................................................................... AO–166–A70 

1124 ..................................................................... Pacific Northwest ....................................................................................... AO–368–A33 

1126 ..................................................................... Southwest .................................................................................................. AO–231–A66 

1131 ..................................................................... Arizona-Las Vegas ..................................................................................... AO–271–A38 

AGENCY: Agricultural Marketing Service, 

USDA.

ACTION: Proposed rule; final decision.

SUMMARY: This document proposes to 

adopt as a final rule, order language 

contained in the interim final rule 

published in the Federal Register on 

April 23, 2004, concerning classification 

of milk use provisions in all Federal 

milk marketing orders. This document 

sets forth the final decision of the 

Department and is subject to approval 

by producers. Specifically, this final 

decision would reclassify milk used to 

produce evaporated milk in consumertype packages or sweetened condensed 

milk in consumer-type packages from 

Class III to Class IV.

FOR FURTHER INFORMATION CONTACT:

Antoinette M. Carter, Marketing 

Specialist, USDA/AMS/Dairy Programs, 

Order Formulation and Enforcement 

Branch, STOP 0231—Room 2971, 1400 

Independence Avenue, SW., 

Washington, DC 20250–0231, (202) 690–

3465, e-mail address: 

antoinette.carter@usda.gov.

SUPPLEMENTARY INFORMATION: This 

administrative action is governed by the 

provisions of sections 556 and 557 of 

Title 5 of the United States Code and 

therefore is excluded from the 

requirements of Executive Order 12866. 

These proposed amendments have 

been reviewed under Executive Order 

12988, Civil Justice Reform. This rule is 

not intended to have a retroactive effect. 

If adopted, this proposed rule will not 

preempt any State or local laws, 

regulations, or policies, unless they 

present an irreconcilable conflict with 

this rule. 

The Agricultural Marketing 

Agreement Act of 1937, as amended (7 

U.S.C. 601–674), 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 

request modification or exemption from 

such order by filing with the Secretary 

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 the law. A 

handler is afforded the opportunity for 

a hearing on the petition. After a 

hearing, the Secretary 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 its principal place of 

business, has jurisdiction in equity to 

review the Secretary’s ruling on the 

petition, provided a bill in equity is 

filed not later than 20 days after the date 

of the entry of the ruling. 

Regulatory Flexibility Act and 

Paperwork Reduction Act 

In accordance with the Regulatory 

Flexibility Act (5 U.S.C. 601 et seq.), the 

Agricultural Marketing Service has 

considered the economic impact of this 

action on small entities and has certified 

that this proposed rule will not have a 

significant economic impact on a 

substantial number of small entities. For 

57234 Federal Register / Vol. 69, No. 185 / Friday, September 24, 2004 / Proposed Rules 

1Federal milk orders do not classify products but 

instead classify the milk (skim milk and butterfat) 

disposed of in the form of a product or used to 

produce a product. This decision references ‘‘Class 

I products,’’ ‘‘Class II products,’’ ‘‘Class III 

products,’’ and ‘‘Class IV products’’ to simplify the 

findings and conclusions.

the purpose of the Regulatory Flexibility 

Act, a dairy farm is considered a ‘‘small 

business’’ if it has an annual gross 

revenue of less than $750,000, and a 

dairy products manufacturer is a ‘‘small 

business’’ if it has fewer than 500 

employees. For the purposes of 

determining which dairy farms are 

‘‘small businesses,’’ the $750,000 per 

year criterion was used to establish a 

production guideline of 500,000 pounds 

per month. Although this guideline does 

not factor in additional monies that may 

be received by dairy producers, it 

should be an inclusive standard for 

most ‘‘small’’ dairy farmers. For 

purposes of determining a handler’s 

size, if the plant is part of a larger 

company operating multiple plants that 

collectively exceed the 500-employee 

limit, the plant will be considered a 

large business even if the local plant has 

fewer than 500 employees. 

During June 2003—the most recent 

representative period at the time of the 

hearing—there were a total of 60,096 

dairy producers whose milk was pooled 

under Federal milk orders. Of the total, 

56,818 dairy producers—or about 95 

percent—were considered small 

businesses based on the above criteria. 

During this same period, there were 

about 1,622 plants associated with 

Federal milk orders. Specifically, there 

were approximately 387 fully regulated 

plants (of which 143 were small 

businesses), 92 partially regulated 

plants (of which 41 were small 

businesses), 44 producer-handlers (of 

which 23 were considered small 

businesses), and 108 exempt plants (of 

which 98 were considered small 

businesses). Consequently, 950 of the 

1,622 plants meet the definition of a 

small business. 

Total pounds of milk pooled under all 

Federal milk orders was 10.498 billion 

for June 2003 which represented 73.5 

percent of the milk marketed in the 

United States during June 2003. Of the 

10.498 billion pounds of milk pooled 

under Federal milk orders during June 

2003, 1.78 million pounds—or 1.7 

percent—was used to produce 

evaporated milk and sweetened 

condensed milk products in consumertype packages. Additionally, during this 

same period, total pounds of Class I 

milk pooled under Federal milk orders 

was 3.475 billion pounds, which 

represents 82.3 percent of the milk used 

in Class I products (mainly fluid milk 

products) that were sold in the United 

States. 

This final decision adopts proposals 

that would reclassify milk used to 

produce evaporated milk or sweetened 

condensed milk in consumer-type 

packages from Class III to Class IV in all 

Federal milk orders. This decision is 

consistent with the Agricultural 

Agreement Act of 1937 (Act), which 

authorizes Federal milk marketing 

orders. The Act specifies that Federal 

milk orders classify milk ‘‘in accordance 

with the form for which or purpose for 

which it is used.’’

Currently, the Federal milk order 

system provides for the uniform 

classification of milk in provisions that 

define four classes of use for milk (Class 

I, Class II, Class III, and Class IV). Each 

Federal milk order sets minimum prices 

that processors must pay for milk based 

on how it is used and computes 

weighted average or uniform prices that 

dairy producers receive.

Under the milk classification 

provisions of all Federal milk orders, 

Class I consists of those products that 

are used as beverages (whole milk, low 

fat milk, skim milk, flavored milk 

products like chocolate milk, etc.)1

Class II includes soft or spoonable 

products such as cottage cheese, sour 

cream, ice cream, yogurt, and milk that 

is used in the manufacture of other food 

products. Class III includes all skim 

milk and butterfat used to make hard 

cheeses—types that may be grated, 

shredded, or crumbled; cream cheese; 

other spreadable cheeses; plastic cream; 

anhydrous milkfat; and butteroil. Class 

III also consists of evaporated milk and 

sweetened condensed milk in 

consumer-type packages. Class IV 

includes, among other things, butter and 

any milk product in dried form such as 

nonfat dry milk.

Evaporated milk and sweetened 

condensed milk in consumer-type 

packages should be classified as Class 

IV because their product characteristics 

and yields are tied directly to the solids 

content of the raw milk used to make 

these products as opposed to the protein 

content as for Class III products. Like 

other Class IV products, evaporated 

milk and sweetened condensed milk in 

consumer-type packages have a 

relatively long shelf-life (i.e., the 

products can be stored for more than 

one year without refrigeration). These 

products also may be substituted for 

other Class IV products (e.g., dry whole 

milk or nonfat dry milk) and compete 

over a wide geographic area with 

products made from non-federally 

regulated milk. Additionally, like other 

Class IV products, evaporated milk and 

sweetened condensed milk in 

consumer-type packages are competitive 

outlets for milk surplus to the Class I 

needs of the market. 

The amendments adopted in the 

tentative final decision and this final 

decision should not have a significant 

economic impact on dairy producers or 

handlers associated with Federal milk 

orders. Since the reclassification of 

evaporated milk and sweetened 

condensed milk in consumer-type 

packages will be uniform in all Federal 

milk orders, dairy producers and 

handlers associated with the orders will 

be subject to the same provisions. The 

classification change should have only a 

minimal impact on the price dairy 

producers receive for their milk due to 

the small quantity of milk pooled under 

Federal milk orders that is used to 

produce evaporated milk or sweetened 

condensed milk in consumer-type 

packages. For example, using the 

Department’s production data provided 

in the hearing record for milk, skim 

milk, and cream used to produce 

evaporated milk and sweetened 

condensed milk in consumer-type 

packages by handlers regulated under 

Federal milk orders for the three years 

of 2000 through 2002, the 

reclassification of the milk used to 

produce these products from Class III to 

Class IV would have affected the 

statistical uniform price for all Federal 

milk orders combined by only $0.0117 

per hundredweight. 

A review of reporting requirements 

was completed under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

chapter 35). It was determined that 

these proposed amendments would 

have no impact on reporting, 

recordkeeping, or other compliance 

requirements because they would 

remain identical to the current 

requirements. No new forms are 

proposed and no additional reporting 

requirements would be necessary. 

This action does not require 

additional information collection that 

requires clearance by the Office of 

Management and Budget (OMB) beyond 

currently approved information 

collection. The primary sources of data 

used to complete the forms are routinely 

used in most business transactions. 

Forms require only a minimal amount of 

information which can be supplied 

without data processing equipment or a 

trained statistical staff. Thus, the 

information collection and reporting 

burden is relatively small. Requiring the 

same reports for all handlers does not 

significantly disadvantage any handler 

that is smaller than the industry 

average. 

Federal Register / Vol. 69, No. 185 / Friday, September 24, 2004 / Proposed Rules 57235

Prior Documents in This Proceeding

Notice of Hearing: Issued September 

2, 2003; published September 8, 2003 

(68 FR 52860). 

Correction of Notice of Hearing:

Issued October 9, 2003; published 

October 16, 2003 (68 FR 59554). 

Tentative Final Decision: Issued 

February 27, 2004; published March 2, 

2004 (69 FR 9763). 

Interim Final Rule: Issued April 19, 

2004; published April 23, 2004 (69 FR 

21950). 

Since this proceeding commenced, 

the Western order was terminated, 

effective April 1, 2004, as published in 

the Federal Register on February 24, 

2004 (69 FR 8327). The termination, 

which removed all operating provisions 

of the order, was based on producers’

disapproval of the issuance of the 

Western order as amended by a tentative 

final decision issued in August 2003 

and published in the Federal Register

on August 18, 2003 (68 FR 49375), and 

comments received in response to the 

proposed termination—published 

January 13, 2004 (69 FR 1957). The 

remaining administrative provisions of 

the order will be terminated at a later 

date. 

Preliminary Statement 

A public hearing was held upon 

proposed amendments to the marketing 

agreements and the orders regulating the 

handling of milk in the Northeast and 

other marketing areas. The hearing was 

held, pursuant to the provisions of the 

Agricultural Marketing Agreement Act 

of 1937, as amended (7 U.S.C. 601–674), 

and the applicable rules of practice (7 

CFR part 900), in Alexandria, Virginia, 

on October 21, 2003. Notice of such 

hearing was issued September 2, 2003, 

and published September 8, 2003 (68 FR 

52860), and a Correction of Notice of 

Hearing was issued October 9, 2003, and 

published October 16, 2003 (68 FR 

59554). 

Upon the basis of the evidence 

introduced at the hearing and the record 

thereof, the Administrator, on February 

27, 2004, issued a Tentative Final 

Decision containing a notice of the 

opportunity to file written exceptions 

thereto. 

The material issues, findings, 

conclusions, rulings, and general 

findings of the tentative final decision 

are hereby approved and adopted and 

are set forth herein. 

The material issues on the record of 

the hearing relate to: 

1. Classification of evaporated milk 

and sweetened condensed milk in 

consumer-type packages; 

2. Classification of monthly bulk milk 

ending inventory; and 

3. Determination as to whether 

emergency marketing conditions exist 

that would warrant the omission of a 

recommended decision and the 

opportunity to file written exceptions. 

Findings and Conclusions 

The following findings and 

conclusions on the material issues are 

based on evidence presented at the 

hearing and the official record thereof: 

1. Classification of evaporated milk 

and sweetened condensed milk in 

consumer-type packages. Proposals that 

would amend all 10 Federal milk 

marketing orders to reclassify milk used 

to produce evaporated milk or 

sweetened condensed milk in 

consumer-type packages from Class III 

to Class IV were adopted in the tentative 

final decision and are adopted in this 

final decision. The proposed 

amendments are consistent with the 

statutory authority for Federal milk 

orders which specifies that milk should 

be classified ‘‘in accordance with the 

form in which or purpose for which it 

is used.’’

A proposal by O–AT–KA Milk 

Products Cooperative, Inc. (O–AT–KA), 

published in the hearing notice as 

Proposal 1, seeks to reclassify 

evaporated milk in consumer-type 

packages (canned evaporated milk) from 

Class III to Class IV. Proposal 2, 

published in the hearing notice as 

proposed by Diehl, Inc., and Milnot 

Holding Corporation, would reclassify 

sweetened condensed milk in 

consumer-type packages (canned 

sweetened condensed milk) from Class 

III to Class IV. The proponents for 

Proposals 1 and 2 ask that the proposals 

be considered on an emergency basis 

and, in this regard, that a recommended 

decision be omitted.

A witness appearing on behalf of O–

AT–KA testified in support of the 

reclassification of evaporated milk from 

Class III to Class IV and supported the 

reclassification of sweetened condensed 

milk from Class III to Class IV. The 

witness stated that O–AT–KA is owned 

by over 2,000 dairy producers who are 

members of Upstate Farms Cooperative, 

Inc., Niagara Milk Cooperative, Inc., and 

Dairylea Cooperative Inc. In 2002, the 

witness noted that over 700 million 

pounds of milk was processed by O–

AT–KA. 

The witness estimated that O–AT–KA 

is the second largest manufacturer of 

canned evaporated milk products in the 

United States. According to the witness, 

the largest manufacturer of canned 

evaporated milk is Nestle Foods 

Company, which produces its product 

in California from milk likely pooled on 

the California State order. Other Federal 

order manufacturers of canned 

evaporated milk, the witness indicated, 

include Diehl, Inc., based in Ohio and 

Milnot Holding Corporation, located in 

Missouri. 

The O–AT–KA witness also provided 

a historical background on the 

classification of canned evaporated 

milk. The O–AT–KA witness explained 

that milk used to produce canned 

evaporated milk products had 

traditionally been classified in the 

lowest use class of Federal milk orders. 

The witness cited the uniform 

classification decision of 1974 in which 

USDA stated (referencing a 3-class 

system): ‘‘A Class II classification 

should not apply to evaporated or 

condensed milk or skim milk in 

consumer-type containers as the 

cooperatives proposed. Such storable 

products should remain in the lowest 

price class. A Class III classification for 

milk in these products will permit such 

uses to remain as a competitive outlet 

for milk surplus to the needs of the 

Class I market. Such products made 

from milk regulated under these orders 

must compete over wide areas with the 

same products processed from ungraded 

milk or other graded milk that is often 

priced at no more than the MinnesotaWisconsin price. Comparable pricing 

should prevail under these 32 orders.’’

published March 5, 1974 [39 FR 8461–

8462]. The witness noted that the Class 

III classification determination of 

canned evaporated milk was left 

unchanged when the national uniform 

classification of Federal milk marketing 

orders was reviewed in 1993. 

The O–AT–KA witness explained that 

the reform of Federal milk marketing 

orders, effective in January 2000, 

continued to classify milk used to 

produce canned evaporated milk as 

Class III even though the lowest use 

manufacturing class was definitively 

split into Class III and Class IV. He 

stated that Class III became a cheese use 

class based on a cheese yield and cheese 

pricing formula. According to the 

witness, the reclassification of canned 

evaporated milk to a more appropriate 

Class IV milk use was simply 

overlooked.

The O–AT–KA witness testified that 

the characteristics and composition of 

canned evaporated milk—including the 

yields, nonfat solids content, and shelf 

life—all support a Class IV classification 

of the product. The witness explained 

that evaporated milk products are made 

by the evaporation of water resulting in 

a milk solids content of a minimum of 

6.5 percent butterfat and 23 percent 

total solids. Like nonfat dry milk, the 

witness stressed, the yields of 

evaporated milk products are impacted 

57236 Federal Register / Vol. 69, No. 185 / Friday, September 24, 2004 / Proposed Rules 

by the nonfat solids content of the raw 

milk used to produce the products. 

Thus, the witness asserted, the higher 

the nonfat solids content of the raw milk 

used to produce the product the less 

water needs to be evaporated and the 

more cans of the product can be made. 

In addition, the witness stated that 

evaporated milk products are packaged 

in steel cans so that the products are 

sterile with a shelf life that can exceed 

12 months. Accordingly, the witness 

contended that canned evaporated milk 

products are more appropriately 

classified as a Class IV rather than Class 

III milk use. 

The O–AT–KA witness testified that 

the current Class III classification 

contributes to improper pricing and 

potential raw milk product cost inequity 

because the yields of evaporated milk 

products are nonfat-solids based rather 

than protein-based. Also, the witness 

stated, evaporated milk products are not 

a substitute for cheese products but may 

be substituted for nonfat dry milk. 

Additionally, the witness stressed 

evaporated milk products can be and are 

produced from reconstituted nonfat dry 

milk, stressing that these products 

cannot be produced from cheese. 

The O–AT–KA witness provided 

actual price data from January 1998 

through September 2003 and forecasted 

price data from October 2003 through 

December 2004. According to the 

witness, the higher raw milk costs 

dictated by the higher minimum Class 

III prices of late cannot be competitively 

recovered in the marketplace for canned 

evaporated milk products. The witness 

also speculated that the 

disadvantageous price relationship was 

likely to continue into the foreseeable 

future and threatens the continued 

production of these products at their 

associated plants. 

The O–AT–KA witness also indicated 

that label recognition, competing 

handlers who are supplied by nonfederally regulated milk sources, and 

the contract bidding processes are 

exacerbating the disadvantageous 

conditions that are now being borne by 

O–AT–KA members in the form of 

reduced returns. If the mis-classification 

is allowed to continue, the witness 

forecasted evaporated milk plants like 

O–AT–KA could ultimately be forced 

out of producing these products, which 

would likely cause raw milk to be 

ultimately diverted to nonfat dry milk 

and butter (Class IV classification). 

Thus, the witness indicated that a 

reclassification to Class IV would deter 

such unfavorable potential outcomes. 

The O–AT–KA witness was of the 

opinion that blend prices to producers 

would not be significantly affected if 

Proposal 1 was adopted because of the 

relatively low volume of pooled milk 

used to produce evaporated milk 

products when compared to the higher 

volumes of milk used to produce all 

other dairy products. The witness 

contended that the current competitive 

disparity between Federal milk order 

manufacturers and non-Federal order 

manufacturers of these products will 

continue until this classification issue is 

resolved. The witness concluded by 

asking that USDA consider this proposal 

on an emergency basis and take 

immediate action by issuing a final 

decision. 

O–AT–KA filed a post-hearing brief 

reiterating its support for the 

reclassification of canned evaporated 

milk and canned sweetened condensed 

milk from Class III to Class IV. 

A witness representing the Milnot 

Holding Corporation (Milnot) testified 

in support of Proposals 1 and 2 to 

reclassify canned evaporated milk and 

canned sweetened condensed milk as 

Class IV. The witness testified that 

Milnot is a small business that employs 

about 422 employees and processes 

approximately 200 million pounds of 

raw milk annually into evaporated milk 

and sweetened-condensed milk in 

consumer-type packages. The witness 

stated that milk used to make these 

products should be classified in the 

lowest manufacturing use class because 

of the products’ shelf-life and 

characteristics.

The Milnot witness stated that canned 

evaporated milk and canned sweetened 

condensed milk products are packaged 

in shelf-stable packages that provide a 

shelf life of a year or more without 

refrigeration. The witness stressed that 

canned evaporated milk and canned 

sweetened condensed milk products are 

driven by the nonfat solids composition 

of the raw milk used to produce the 

products which is similar to nonfat dry 

milk—a Class IV product. Similar to the 

O–AT–KA representative, the Milnot 

witness explained that the higher the 

nonfat solids content of the raw milk, 

the less water needs to be removed and 

the more cans of product result from the 

raw milk. Thus, the witness concluded 

that canned evaporated milk and 

canned sweetened condensed milk 

products are closely related and that 

such products, therefore, should be 

classified as Class IV since ‘‘the 

production of these milk items is not 

related to the protein-driven curd 

development’’ associated with cheese 

production. 

The Milnot witness also cited the 

1974 uniform classification decision, 

published March 5, 1974 (38 FR 8461–

8462), which stated that evaporated 

milk or condensed milk or skim milk 

products in consumer-type containers 

are storable products that should remain 

in the lowest price class (Class III). Like 

the O–At–KA witness, the witness 

pointed out that the reform of milk 

marketing orders provided a definitive 

split between Class III and Class IV and 

overlooked canned evaporated milk and 

canned sweetened condensed milk 

products by continuing the Class III 

classification for milk used to make 

these products. 

The Milnot witness also testified that 

the disadvantageous price relationship 

between Class III and Class IV had 

become increasingly acute over the past 

year, and it is now especially critical 

that the Department handle the matter 

expeditiously. 

A witness representing Eagle Family 

Foods (Eagle) also testified in support of 

reclassifying milk used to produce 

canned evaporated milk products, as 

well as canned sweetened condensed 

milk, as a Class IV use of milk. The 

witness explained that Eagle is a small 

business, employing about 300 people 

and operating two manufacturing plants 

located in Wellsboro, Pennsylvania, and 

Starkville, Mississippi. According to the 

witness, the primary business of the 

company is manufacturing sweetened 

condensed milk products for national 

distribution. 

The Eagle witness explained that the 

milk purchased by their plants for 

manufacturing canned sweetened 

condensed milk products is pooled on 

Federal milk orders. The cost of the raw 

milk, the witness contended, makes it 

more difficult to compete and can 

drastically affect the viability of their 

business. The witness also asserted that 

sweetened condensed milk products are 

solids-based rather than protein-based 

products and therefore should be 

classified as Class IV use of milk. As did 

the O–AT–KA and Milnot witnesses, the 

Eagle witness asked that the issue be 

handled on an emergency basis. 

A witness appearing on behalf of 

Diehl, Inc. (Diehl), testified in support 

of reclassifying milk used to produce 

both canned evaporated milk and 

canned sweetened condensed milk 

products from Class III to Class IV 

because milk used to produce such 

products are solids-based products 

versus protein-based products. The 

witness testified that Diehl is a familyowned and operated small business 

which manufactures canned dairy 

products, including canned evaporated 

milk and canned sweetened condensed 

milk products. The witness stated that 

Diehl has plants in Ohio, Michigan, and 

Idaho that purchase milk pooled under 

Federal milk orders. The witness also 

Federal Register / Vol. 69, No. 185 / Friday, September 24, 2004 / Proposed Rules 57237

asked that the proposals be handled on 

an emergency basis due to what they 

view as the improper classification of 

milk used to make these products. 

A witness appearing on behalf of 

Association of Dairy Cooperatives of the 

Northeast (ADCNE) testified in favor of 

the proponents’ proposals concerning 

the reclassification of canned 

evaporated milk and canned sweetened 

condensed milk products as Class IV. 

According to the witness, ADCNE is 

comprised of several cooperatives that 

collectively represent more than 65 

percent of the producers pooled under 

the Northeast milk order. 

The ADCNE witness testified that it is 

important for Federal milk orders to 

appropriately classify products. Canned 

evaporated milk and canned sweetened 

condensed milk, the witness asserted, 

are long shelf-life products that fit best 

in Class IV under the current system of 

product classification and end-product 

pricing. He pointed out that large price 

differences between Class III and Class 

IV can place Federal order 

manufacturers of canned evaporated 

milk and canned sweetened condensed 

milk products—which are distributed 

nationally—at a substantial competitive 

disparity with non-Federal order 

manufacturers. The witness supported 

USDA adopting Proposals 1 and 2 on an 

emergency basis. 

ADCNE also filed a post-hearing brief 

reiterating their position and asserting 

that the mis-classification of canned 

evaporated milk and canned sweetened 

condensed milk products in Class III 

(cheese use category) has resulted in a 

$4.00 per hundredweight price 

discrepancy between Class III and Class 

IV that is extremely burdensome to 

Federal order processors of these 

products, including the ADCNE member 

O–AT–KA. ADCNE stated that it is 

imperative the changes be made on an 

expedited basis to restore order to the 

national market for these products.

A witness appearing on behalf of New 

York State Dairy Foods, Inc. (NYSDF), 

testified in support of Proposal 1. The 

witness contended that O–AT–KA can 

no longer effectively compete in 

evaporated milk markets without 

incurring very large losses due to the 

current price disparity between 

Federally regulated milk used to 

produce evaporated milk consumer 

products and non-Federally regulated 

milk used to make such products. 

The NYSDF witness also testified that 

a Class IV classification is appropriate 

since evaporated milk, like dried milk 

powders, is a product end use involving 

extensive special processing and the 

removal of the water from milk. The 

witness asserted that evaporated milk is 

similar to nonfat milk powder and 

butter because it has a relatively long 

storage capability. The witness also 

supported the reclassification of milk 

used to produce canned sweetened 

condensed milk from Class III to Class 

IV. 

The National Milk Producers 

Federation (NMPF) filed a brief in 

support of the reclassification of canned 

evaporated milk and canned sweetened 

condensed milk from Class III to Class 

IV. NMPF represents nearly 60,000 

dairy farmers that produce the majority 

of the United States milk supply. 

NMPF’s brief asserted that Class III is 

fundamentally for cheese products 

which is consistent with the Class III 

cheese based pricing formula, whereas 

Class IV is a class for milk ingredients 

such as butter and milk powders. NMPF 

believes evaporated and sweetened 

condensed milk products are more 

appropriately associated with products 

such as milk powders and butter rather 

than cheese products. 

NMPF encouraged USDA to consider, 

with respect to adopting Proposals 1 

and 2, the compatibility with State 

regulations, which would contribute to 

more orderly marketing both in and 

outside of Federal milk marketing order 

areas. NMPF also supported the 

handling of the action on an emergency 

basis to remove the competitive 

disadvantage currently imposed on 

Federal order manufacturers of canned 

evaporated milk and canned sweetened 

condensed milk products. 

There was no opposition testimony 

for the adoption of Proposals 1 and 2 

given at the hearing or contained in 

post-hearing briefs. However, two 

exceptions were filed in response to the 

tentative final decision pertaining to 

reclassification amendments for milk 

used to produce canned evaporated 

milk or canned sweetened condensed 

milk. 

A comment from Nestle’ USA 

(Nestle’) requested that a decision be 

postponed for 90 days because the 

emergency reclassification, in their 

view, is based on data and statistics that 

do not reflect appropriately on the 

longer term historical reality and is not 

in the best immediate and future 

interests of the consumer—commercial 

customers as well as Federal aid 

recipients through USDA purchasing 

programs. According to Nestle’, the 

selective use of Class III and Class IV 

price data, USDA bid award data, and 

instances of contradictory information 

and projections within the hearing 

record requires further investigation to 

ensure adoption of a decision that 

would best represent the long-term 

needs of all parties. 

Another comment was submitted 

stating that the invitation for a public 

hearing did not adequately invite all 

interested parties, resulting in record 

evidence and a decision that are biased 

and one-sided. 

Findings & Conclusions:

The tentative final decision and this 

final decision finds that the record 

evidence of this proceeding strongly 

supports the reclassification of milk 

used to produce evaporated milk in 

consumer-type packages or sweetened 

condensed milk in consumer-type 

packages from Class III to Class IV. The 

proposed amendments adopted in the 

tentative final decision and this final 

decision reclassify milk used to produce 

canned evaporated milk or canned 

sweetened condensed milk to a Class IV 

use of milk. The milk used to produce 

these products, like other Class IV dry 

milk products, has a relatively long 

shelf life, may be stored without 

refrigeration, is sold over a wide 

geographic area competing for sales 

with milk from non-Federally regulated 

sources, and remains an outlet for milk 

not needed for fluid use. Most 

importantly, the yields of these products 

are based directly on the nonfat solids 

content of the raw milk used to make 

these products. Thus, the 

reclassification appropriately classifies 

and prices milk used to produce 

evaporated milk or sweetened 

condensed milk products in consumertype packages under all Federal milk 

orders. 

As noted in the tentative final 

decision, the Agricultural Marketing 

Agreement Act of 1937 specifies that 

Federal milk marketing orders classify 

milk ‘‘in accordance with the form in 

which or the purpose for which it is 

used.’’ Currently, Federal milk orders 

establish uniform classification of milk 

provisions for all Federal milk orders 

consisting of four classes of use (Class 

I, Class II, Class III, and Class IV) for 

pricing milk. 

The classes of use can be categorized 

as a fluid/beverage class and three 

manufacturing classes of milk. Class I 

consists of those products that are used 

for fluid/beverage use with certain 

exceptions for formulas especially 

prepared for infant feeding or dietary 

use in hermetically-sealed containers. 

Class II includes soft or spoonable 

products such as cottage cheese, sour 

cream, ice cream, yogurt, and milk that 

is used in the manufacture of other food 

products. Class III consists of milk used 

in hard cheeses, cream cheese, and 

other spreadable cheese. Class IV 

consists of butter or any milk product in 

dried form and bulk milk that is in 

inventory at the end of the month.

57238 Federal Register / Vol. 69, No. 185 / Friday, September 24, 2004 / Proposed Rules 

Federal milk marketing orders 

establish and maintain orderly 

marketing conditions for dairy farmers 

and handlers through classified pricing 

(pricing milk based on use) and the 

pooling of the proceeds of milk used in 

a marketing area. These provisions 

allow Federal milk marketing orders to 

establish minimum prices that handlers 

must pay for milk based on use and 

return a weighted average or uniform 

price that dairy farmers receive for their 

milk. These provisions ensure that all 

dairy farmers supplying a market share 

in the benefit that arises from classified 

pricing through marketwide pooling of 

milk. 

Federal milk orders provide a pricing 

system for manufactured dairy products 

that is based on end-product price 

formulas. Under this system of pricing, 

the Class III price for milk is derived 

from the price of butterfat, protein, and 

other nonfat/non-protein milk solids 

(other solids). The butterfat, protein, 

and other solids prices are dependent 

upon the wholesale prices of butter, 

cheese, and dry whey, respectively, and 

make allowances and yield factors for 

the dairy products. The Class IV price 

is derived from the price of butterfat and 

nonfat milk solids. The price of butter 

and nonfat milk solids are dependent 

upon the wholesale price of butter and 

nonfat dry milk, respectively, and make 

allowances and yield factors for the 

products. 

As concluded in the tentative final 

decision, the record evidence clearly 

indicates that product yields for canned 

evaporated milk and canned sweetened 

condensed milk products are based 

exclusively on the solids content of the 

raw milk used to make the product. The 

record reveals that evaporated milk 

must have a minimum of 6.5 percent 

butterfat and 23 percent total solids and 

that sweetened condensed milk must 

have a minimum of 8 percent butterfat 

and 28 percent total solids. The higher 

the milk solids content of the raw milk 

used to make canned evaporated milk or 

canned sweetened condensed milk the 

less water needs to be removed, which 

results in more cans of these products 

produced at the above standards. The 

protein content of the raw milk is not 

relevant to the production of these 

condensed milk products. Accordingly, 

the tentative final decision and this final 

decision concludes that the 

reclassification of milk used to produce 

canned evaporated and canned 

sweetened condensed milk products as 

a Class IV use will ensure that the milk 

used to produce these products is 

properly classified and priced. 

The uniform classification of milk 

decision of 1974 stated that canned 

evaporated milk and canned sweetened 

condensed milk are storable products 

that should remain in the lowest 

manufacturing use class based on a 3-

class system. The 1974 decision further 

states that ‘‘A Class III classification for 

producer milk in these products will 

permit such uses to remain as a 

competitive outlet for milk surplus to 

the needs of the Class I market.’’ The 

1974 decision also states such products 

made from milk regulated under these 

orders must compete over wide areas 

with the same products processed from 

ungraded milk or other graded milk.’’

These characteristics of canned 

evaporated and canned sweetened 

condensed milk products remain 

applicable today, some 30 years later. 

The Class III classification 

determination of canned evaporated 

milk and canned sweetened condensed 

milk was left unchanged during the 

review of the national uniform 

classification of milk provisions for 

Federal milk marketing orders in 1993. 

During the reform of the Federal milk 

order program the classification of milk 

used to produce canned evaporated 

milk and canned sweetened condensed 

milk products remained as Class III milk 

use products even though Federal order 

reform resulted in a definitive split 

between milk used to produce Class III 

and Class IV products. The Class III 

designation in all Federal milk orders 

was determined for milk used to 

produce cheese with the corresponding 

Class III price based primarily on cheese 

prices, the make allowance for cheese, 

and cheese yields from a hundredweight 

of milk. 

On the basis of the record evidence, 

the tentative final decision and this final 

decision find that the product 

characteristics of evaporated milk and 

sweetened condensed milk are more 

similar to nonfat dry milk (a Class IV 

product) rather than cheese (a Class III 

product). Like dry milk powders, these 

products can be stored for long periods 

of time without refrigeration. These 

products also are competitive outlets for 

milk that is surplus to the Class I needs 

of a Federal order market. Most 

importantly, the yields for canned 

evaporated and canned sweetened 

condensed milk products are tied 

directly to the milk solids contained in 

the raw milk used to produce these 

products versus the protein content as 

for Class III products.

The record evidence of this 

proceeding provided historical data of 

class prices covering the period since 

Federal milk orders were reformed in 

January 2000 through September 2003. 

According to this data, the Class IV 

price exceeded the Class III price by an 

average of $2.13 per hundredweight in 

2000, $0.91 per hundredweight in 2001, 

and $0.42 per hundredweight in 2002. 

However, the Class III price for the 

period of January 2003 through 

September 2003 has exceeded the Class 

IV price by an average of $1.07 per 

hundredweight. The monthly Class III 

price for milk, generally, was below the 

Class IV price from the implementation 

of Federal milk marketing order reform 

in January 2000 through June 2003. The 

monthly Class III price increased above 

the Class IV price beginning in July 

2003, and the price difference increased 

to a level of $4.25 per hundredweight in 

September 2003. As determined in the 

tentative final decision, this data clearly 

demonstrates that the Class III and Class 

IV price relationship has shifted since 

the reform of Federal milk orders in 

2000 and that the Class III and Class IV 

prices move independently of each 

other. 

The price difference between Class III 

and Class IV gave rise to proponents’

concerns of competitive inequities. The 

predictions of competitive inequities 

that would likely continue if the 

Department determined that milk used 

to produce such products remain 

classified as a Class III use of milk may 

or may not be valid. These concerns 

alone do not provide adequate rationale 

for determining if the milk used to 

produce such products are properly 

classified under the Federal milk order 

system. What is most important is that 

milk is properly classified in accordance 

with form and use and in doing so 

promotes orderly marketing conditions. 

All of the proponents of Proposals 1 

and 2 are handlers who operate nonpool 

plants and, accordingly, are not 

regulated by any Federal milk marketing 

order. However, the record reveals that 

these entities purchase and receive milk 

that is pooled and priced under a 

Federal milk marketing order. Unlike 

pool handlers, nonpool handlers do not 

pool their milk receipts or share in the 

returns that are determined through the 

marketwide pooling of milk. Nonpool 

handlers are not required to purchase 

milk already pooled and priced under 

the terms of an order. In this regard, the 

price paid by nonpool handlers is not 

known if purchased through nonpool 

sources, and even if purchased through 

pool sources, such purchase may or may 

not have transacted at minimum class 

prices. Such is especially true when a 

nonpool handler receives milk through 

diversion from pool handlers. A pooled 

handler diverting milk to a nonpool 

plant is the entity that incurs the 

payment obligation to dairy farmers and 

accounts to the marketwide pool for the 

volume of milk at the classified use 

Federal Register / Vol. 69, No. 185 / Friday, September 24, 2004 / Proposed Rules 57239

value of milk so diverted. Consequently, 

the price a nonpool handler actually 

pays for such milk is not known. 

Therefore, the tentative final decision 

and this final decision find that it 

cannot be determined whether a 

competitive advantage or disadvantage 

may arise in those times when the Class 

III price for milk rises above the Class 

IV price, which results in the Class IV 

price being the lowest valued use of 

milk. 

Hearing participants expressed 

concern about price disparities that 

result from the improper classification 

of milk used to produce evaporated milk 

and sweetened condensed milk 

products as Class III with entities that 

do not use milk priced under a Federal 

milk marketing order. Like the tentative 

final decision, this final decision does 

not rely on findings with respect to such 

concerns as a reason for changing the 

classification of milk used to produce 

these products from the current Class III 

milk use classification to a Class IV use.

As indicated by the record, milk used 

to produce canned evaporated milk or 

canned sweetened condensed milk 

products is directly tied to the value of 

the milk solids content of raw milk and 

resulting yields based on the solids 

content of raw milk as opposed to the 

protein content for Class III products. 

The current inappropriate classification 

of milk used to produce canned 

evaporated milk or canned sweetened 

condensed milk products as a Class III 

use of milk has implications affecting 

both handlers and producers. From the 

handler perspective, the misclassification of milk may affect the 

price they pay for milk in these uses and 

may affect their competitive position 

with milk from non-Federally regulated 

sources. From the producer viewpoint, 

the mis-classification of milk affects the 

total value of the marketwide pool of 

milk and thus affects the blend price 

dairy farmers receive for their milk. 

Analysis of production data from 2000 

to 2002 for canned evaporated milk and 

canned sweetened condensed milk 

reveals that the blend price for all orders 

would have increased by $0.0117 per 

hundredweight. From either viewpoint, 

all market participants should be 

assured that orderly marketing 

conditions are advanced by properly 

classifying milk in accordance with 

form and use. Record evidence clearly 

indicates that the impact of 

reclassification of milk used to produce 

these dairy products is of nominal 

impact to producer milk value. 

The Nestle’ comment requesting a 90-

day delay in the issuance of a decision 

is denied due to the lack of record 

evidence to support the claim. Nestle 

suggested that the official record data 

was inadequate and did not include 

historical realities; and thus, the 

decision adopting the reclassification 

proposals was not in the best interest of 

consumers. The record evidence of this 

proceeding—as specified in the 

tentative decision—clearly and strongly 

supports the reclassification of canned 

evaporated milk and canned sweetened 

condensed milk from Class III to Class 

IV based on the products’

characteristics, composition, and 

production yields. In addition, record 

data indicates that the reclassification 

amendments will not have a significant 

economic impact on affected entities. 

The comment submitted in response 

to the tentative final decision claiming 

the public was inadequately notified of 

the public hearing and that the decision 

issued pertaining to the reclassification 

of canned evaporated milk and canned 

sweetened condensed milk was onesided—reflecting only the views of the 

proponents—and not in the pubic 

interest is unfounded. Notices informing 

interested persons that a public hearing 

would be held to consider proposed 

amendments to certain classification of 

milk use provisions of all Federal orders 

were published in the Federal Register. 

Interested persons were also notified 

through other means such as 

notifications by Market Administrators 

and the posting of the Notices on the 

USDA, Agricultural Marketing Service, 

Dairy Programs Internet site. In 

addition, the formal rulemaking process 

provides an opportunity for interested 

parties, which includes dairy industry 

participants—producers and 

processors—and consumers, to 

participate in the public hearing 

proceeding by presenting record 

evidence in the form of testimony, 

views, data, arguments, and/or 

comments concerning the proposals 

being considered. Accordingly, it must 

be concluded that adequate notice was 

provided to interested parties. Also, the 

findings and conclusions specified in 

the tentative final decision and adopted 

in this final decision are based on the 

hearing record evidence that clearly 

supports the reclassification of canned 

evaporated milk and canned sweetened 

condensed milk from Class III to Class 

IV. 

Based upon the official record it is 

therefore concluded that milk used to 

produce evaporated milk or sweetened 

condensed milk in consumer-type 

packages should be classified as a Class 

IV use of milk. 

2. Classification of monthly bulk milk 

ending inventory. Proposal 3 of the 

hearing notice, seeking to classify milk 

in bulk ending inventory each month to 

the lowest priced class of Class III or 

Class IV, was not adopted in the 

tentative final decision and is not 

adopted in this final decision. 

Currently, bulk fluid milk products and 

bulk fluid cream products in inventory 

at the end of the month are classified as 

a Class IV use of milk.

A witness testifying on behalf of New 

York State Dairy Foods, Inc. (NYSDF), 

testified that the classification of bulk 

ending inventories beginning with Class 

IV often tends to increase the volume of 

other source milk assigned to a highervalued class at the transferee plants than 

is accorded producer milk pooled on an 

order. The witness asserted that this was 

not the intent of the present provision 

dealing with the proper classification of 

milk in ending inventory. The witness 

presented data and testimony which 

indicated that class prices often 

fluctuate independently and do not 

always maintain a constant relationship 

to one another. According to the 

witness, the typically higher-valued 

classes can experience a price inversion 

resulting in a negative producer price 

differential. The witness asserted that a 

more equitable sharing of pool proceeds 

would result from bulk ending 

inventories being classified at the 

lowest-valued class. There was no 

opposing testimony provided at the 

hearing. 

The Association of Dairy Cooperatives 

in the Northeast (ADCNE) filed a posthearing brief in opposition to the 

proposal to change the classification of 

monthly bulk ending inventory. The 

ADCNE brief stated that testimony 

supporting the adoption of the proposal 

was only provided by Northeast milk 

order handlers even though the proposal 

would affect all Federal milk orders in 

the United States. According to ADCNE, 

the ‘‘tilt’’ in USDA/Commodity Credit 

Corporation butter/powder support 

price purchase prices will continue into 

the foreseeable future thus mitigating 

the need to reclassify milk in ending 

inventories as a Class IV use of milk. 

ADCNE indicated there could be 

unintended consequences of making 

such a change that could result in losses 

of producer income. Accordingly, 

ADCNE concluded that the proposal is 

not critical and should not be adopted 

without further input and a complete 

examination of the issue. 

The National Milk Producers 

Federation (NMPF) also filed a posthearing brief in opposition to the 

adoption of Proposal 3 on an emergency 

basis. According to NMPF, the impact of 

the proposal to reclassify monthly bulk 

ending inventory of fluid milk products 

and fluid cream products from Class IV 

to the lowest-priced class of Class III or 

57240 Federal Register / Vol. 69, No. 185 / Friday, September 24, 2004 / Proposed Rules 

Class IV cannot be analyzed without 

knowledge of the specific conforming 

changes to other affected sections. 

The NMPF brief stated that Proposal 

3 seemed reasonable in that it would 

allow processors to avoid advancing 

money to the pool that could be 

returned for ultimate use in a lower 

priced class. The NMPF brief argued 

that the ‘‘lower-of’’ concept for 

classifying inventories is supportable as 

an analog to the ‘‘higher-of’’ principle 

for Class I milk. Accordingly, the NMPF 

brief requested that interested parties be 

provided ample opportunity to 

comment on the proposed rule should 

Proposal 3 be recommended for 

adoption. 

Findings and Conclusions:

The tentative final decision and this 

final decision find that the hearing 

record does not provide sufficient 

evidence to adopt a change in the 

classification rules applicable to 

monthly bulk ending inventory. 

Specifically, the hearing record does not 

provide information on the potential 

impact of the proposed amendment on 

affected parties. Accordingly, the bulk 

ending inventory reclassification 

proposal is not adopted. 

3. Determining whether emergency 

marketing conditions exist that would 

warrant the omission of a recommended 

decision and the opportunity to file 

written exceptions. The hearing record 

for this proceeding clearly established 

that the proposals to reclassify milk 

used to produce evaporated milk or 

sweetened condensed milk in 

consumer-type packages from Class III 

to Class IV should be adopted on an 

emergency basis. Record evidence 

clearly established that milk used to 

produce these products was 

inappropriately classified as a Class III 

milk use. The hearing record indicates 

that the milk used to produce these 

products should be classified as Class IV 

and should be priced under Federal 

milk orders accordingly.

Milk used to produce canned 

evaporated milk or canned sweetened 

condensed milk products is more 

appropriately related to the solids 

content of the raw milk used to make 

these products, which has a direct 

bearing on the yields of these products. 

The current Class III classification of 

milk is tied to a value determined 

primarily to reflect the protein content 

of milk, which distorts the basis for 

determining the appropriate value of 

milk used to produce canned 

evaporated milk and canned sweetened 

condensed milk products where the 

solids content determines the 

appropriate milk value. Thus, the misclassification of milk results in 

improper pricing of such milk under 

Federal milk orders which causes 

disorderly marketing conditions 

affecting both handlers and producers. 

Consequently, it was determined that 

emergency marketing conditions exist, 

and therefore the issuance of a 

recommended decision was omitted. 

Rulings on Proposed Findings and 

Conclusions 

Briefs and proposed findings and 

conclusions were filed on behalf of 

certain interested parties. The briefs, 

proposed findings and conclusions, and 

the evidence in the record were 

considered in making the findings and 

conclusions set forth above. To the 

extent that the suggested findings and 

conclusions filed by interested parties 

are inconsistent with the findings and 

conclusions set forth herein, the 

requests to make such findings or reach 

such conclusions are denied for the 

reasons previously stated in this 

decision. 

General Findings 

The findings and determinations 

hereinafter set forth supplement those 

that were made when the Northeast and 

other marketing orders were first issued 

and when they were amended. The 

previous findings and determinations 

are hereby ratified and confirmed, 

except where they may conflict with 

those set forth herein. 

(a) The tentative marketing 

agreements and the orders, as hereby 

proposed to be amended, and all of the 

terms and conditions thereof, will tend 

to effectuate the declared policy of the 

Act; 

(b) The parity prices of milk as 

determined pursuant to section 2 of the 

Act are not reasonable in view of the 

price of feeds, available supplies of 

feeds, and other economic conditions 

which affect market supply and demand 

for milk in the marketing area, and the 

minimum prices specified in the 

tentative marketing agreements and the 

orders, as hereby proposed to be 

amended, are such prices as will reflect 

the aforesaid factors, insure a sufficient 

quantity of pure and wholesome milk, 

and be in the public interest; and 

(c) The tentative marketing 

agreements and the orders, as hereby 

proposed to be amended, will regulate 

the handling of milk in the same 

manner as, and will be applicable only 

to persons in the respective classes of 

industrial and commercial activity 

specified in, marketing agreements upon 

which a hearing has been held. 

Rulings on Exceptions 

In arriving at the findings and 

conclusions, and the regulatory 

provisions of this decision, each of the 

exceptions received was carefully and 

fully considered in conjunction with the 

record evidence. To the extent that the 

findings and conclusions and the 

regulatory provisions of this decision 

are at variance with any of the 

exceptions, such exceptions are hereby 

overruled for the reasons previously 

stated in this decision. 

Marketing Agreement and Order 

Annexed hereto and made a part 

hereof is a Marketing Agreement 

regulating the handling of milk. The 

Order amending the orders regulating 

the handling of milk in the Northeast 

and all other marketing areas was 

approved by producers and published 

in the Federal Register on April 23, 

2004 (69 FR 21950), as an Interim Final 

Rule. Both of these documents have 

been decided upon as the detailed and 

appropriate means of effectuating the 

foregoing conclusions.

It is hereby ordered that this entire 

decision and the marketing agreement 

annexed hereto be published in the 

Federal Register. 

Referendum Order To Determine 

Producer Approval; Determination of 

Representative Period; and Designation 

of Referendum Agent 

It is hereby directed that referenda be 

conducted and completed on or before 

the 30th day from the date this decision 

is published in the Federal Register, in 

accordance with the procedure for the 

conduct of referenda (7 CFR 900.300–

311), to determine whether the issuance 

of the orders as amended and as hereby 

proposed to be amended, regulating the 

handling of milk in the Northeast and 

Mideast marketing areas is approved or 

favored by producers, as defined under 

the terms of the order (as amended and 

as hereby proposed to be amended), 

who during such representative period 

were engaged in the production of milk 

for sale within the aforesaid marketing 

areas. 

The representative period for the 

conduct of such referenda is hereby 

determined to be January 2004. 

The agents of the Secretary to conduct 

such referenda are hereby designated to 

be the respective market administrators 

of the aforesaid orders. 

Determination of Producer Approval 

and Representative Period 

January 2004 is hereby determined to 

be the representative period for the 

purpose of ascertaining whether the 

issuance of the orders, as hereby 

Federal Register / Vol. 69, No. 185 / Friday, September 24, 2004 / Proposed Rules 57241

1First and last sections of order.

2Appropriate Part number.

3Next consecutive section number.

4Appropriate representative period for the order.

proposed to be amended, regulating the 

handling of milk in the Appalachian, 

Florida, Southeast, Upper Midwest, 

Central, Pacific Northwest, Southwest, 

and Arizona Las Vegas marketing areas, 

is approved or favored by producers, as 

defined under the terms of the orders (as 

amended and as hereby proposed to be 

amended) who during such 

representative period were engaged in 

the production of milk for sale within 

the aforesaid marketing areas.

List of Subjects in 7 CFR Parts 1000, 

1001, 1005, 1006, 1007, 1030, 1032, 

1033, 1124, 1126, and 1131 

Milk marketing orders.

Dated: September 20, 2004. 

A.J. Yates, 

Administrator, Agricultural Marketing 

Service.

Order Amending the Orders Regulating 

the Handling of Milk in the Northeast 

and Other Marketing Areas 

(This order shall not become effective 

unless and until the requirements of 

§ 900.14 of the rules of practice and 

procedure governing proceedings to 

formulate marketing agreements and 

marketing orders have been met.) 

Findings and Determinations 

The findings and determinations 

hereinafter set forth supplement those 

that were made when the orders were 

first issued and when they were 

amended. The previous findings and 

determinations are hereby ratified and 

confirmed, except where they may 

conflict with those set forth herein. 

(a) Findings. A public hearing was 

held upon certain proposed 

amendments to the tentative marketing 

agreements and to the orders regulating 

the handling of milk in the Northeast 

and other marketing areas. The hearing 

was held pursuant to the provisions of 

the Agricultural Marketing Agreement 

Act of 1937, as amended (7 U.S.C. 601–

674), and the applicable rules of 

practice and procedure (7 CFR part 900). 

Upon the basis of the evidence 

introduced at such hearing and the 

record thereof, it is found that: 

(1) The said orders as hereby 

amended, and all of the terms and 

conditions thereof, will tend to 

effectuate the declared policy of the Act;

(2) The parity prices of milk, as 

determined pursuant to section 2 of the 

Act, are not reasonable in view of the 

price of feeds, available supplies of 

feeds, and other economic conditions 

which affect market supply and demand 

for milk in the aforesaid marketing 

areas. The minimum prices specified in 

the orders as hereby amended are such 

prices as will reflect the aforesaid 

factors, insure a sufficient quantity of 

pure and wholesome milk, and be in the 

public interest; and 

(3) The said orders as hereby 

amended regulate the handling of milk 

in the same manner as, and are 

applicable only to persons in the 

respective classes of industrial or 

commercial activity specified in, 

marketing agreements upon which a 

hearing has been held. 

Order Relative to Handling 

It is therefore ordered, that on and 

after the effective date hereof, the 

handling of milk in the Northeast and 

other marketing areas shall be in 

conformity to and in compliance with 

the terms and conditions of the order, as 

amended, and as hereby amended, as 

follows: 

The provisions of the order amending 

the orders contained in the interim 

amendment of the orders issued by the 

Administrator, Agricultural Marketing 

Service, on April 19, 2004, and 

published in the Federal Register on 

April 23, 2004 (69 FR 21950), are 

adopted without change and, shall be 

the terms and provisions of this order.

[This marketing agreement will not 

appear in the Code of Federal 

Regulations.]

Marketing Agreement Regulating the 

Handling of Milk in Certain Marketing 

Areas 

The parties hereto, in order to effectuate 

the declared policy of the Act, and in 

accordance with the rules of practice and 

procedure effective thereunder (7 CFR Part 

900), desire to enter into this marketing 

agreement and do hereby agree that the 

provisions referred to in paragraph I hereof 

as augmented by the provisions specified in 

paragraph II hereof, shall be and are the 

provisions of this marketing agreement as if 

set out in full herein. 

I. The findings and determinations, order 

relative to handling, and the provisions of 

§§ ______1 to_____ , all inclusive, of the order 

regulating the handling of milk in the (____

Name of order____) marketing area (7 CFR 

Part____2) which is annexed hereto; and

II. The following provisions: § ______3

Record of milk handled and authorization to 

correct typographical errors.

(a) Record of milk handled. The 

undersigned certifies that he/she handled 

during the month of ______4 ,____

hundredweight of milk covered by this 

marketing agreement.

(b) Authorization to correct typographical 

errors. The undersigned hereby authorizes 

the Deputy Administrator, or Acting Deputy 

Administrator, Dairy Programs, Agricultural 

Marketing Service, to correct any 

typographical errors which may have been 

made in this marketing agreement. 

§ ______3 Effective date. This marketing 

agreement shall become effective upon the 

execution of a counterpart hereof by the 

Secretary in accordance with Section 

900.14(a) of the aforesaid rules of practice 

and procedure. 

In Witness Whereof, The contracting 

handlers, acting under the provisions of the 

Act, for the purposes and subject to the 

limitations herein contained and not 

otherwise, have hereunto set their respective 

hands and seals.

Signature

By (Name) lllllllllllllll

(Title) lllllllllllllllll

(Address) llllllllllllllll

(Seal)

Attest

[FR Doc. 04–21416 Filed 9–23–04; 8:45 am] 

BILLING CODE 3410–02–P

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[Region II Docket No. R02—OAR–2004—

NY–0002, FRL–7818–3] 

Approval and Promulgation of 

Implementation Plans; New York; Low 

Emission Vehicle Program

AGENCY: Environmental Protection 

Agency.

ACTION: Proposed rulemaking.

SUMMARY: The Environmental Protection 

Agency (EPA) is proposing to approve a 

New York State State Implementation 

Plan (SIP) revision which adopts 

California’s second generation low 

emission vehicle program for light-duty 

vehicles, (LEV II). Clean Air Act Section 

177 allows states to adopt motor vehicle 

emissions standards that are identical to 

California’s and New York meets this 

requirement. Specifically, the State’s 

SIP revision adopts changes to its 

existing LEV rule by incorporating a 

non-methane hydrocarbon standard and 

various administrative and grammatical 

changes to make its existing LEV rule 

identical to California’s LEV II program.

DATES: Comments must be received on 

or before October 25, 2004.

ADDRESSES: Submit your comments, 

identified by Regional Material in 

EDocket (RME) ID Number R02–OAR–

2004–NY–0002 by one of the following 

methods: 

I. Federal eRulemaking Portal: http://

www.regulations.gov. Follow the on-line 

instructions for submitting comments. 

II. Agency Web site: http://

docket.epa.gov/rmepub/ Regional