[Federal Register Volume 74, Number 185 (Friday, September 25, 2009)]
[Proposed Rules]
[Pages 48868-48870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-23150]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

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

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Federal Register / Vol. 74, No. 185 / Friday, September 25, 2009 / 
Proposed Rules

[[Page 48868]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1250

[Doc. No. AMS-PY-08-0032]


Amendment to Egg Research and Promotion Order and Regulations To 
Increase the Rate of Assessment

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend the Egg Research and Promotion 
Order to increase the assessment rate on egg producers paying 
assessments to the American Egg Board (AEB) from 10 cents to 15 cents 
per 30-dozen case of commercial eggs, provided the increase is approved 
by egg producers voting in a referendum. This proposal would also make 
a conforming amendment to the regulations. AEB, which administers the 
Order, recommended this action to sustain and expand its national 
promotion, research, and consumer information program.

DATES: Comments must be received on or before November 24, 2009.

ADDRESSES: Interested persons are invited to submit written comments on 
the Internet at http://www.regulations.gov or to Angela C. Snyder; 
Research and Promotion; Standards, Promotion, & Technology Branch; 
Poultry Programs, AMS, U.S. Department of Agriculture; 1400 
Independence Avenue, SW., Stop 0256; Washington, DC 20250-0259; fax 
(202) 720-2930. Comments should reference the docket number and the 
date and page number of this issue of the Federal Register and will be 
available for public inspection in the Office of the Docket Clerk, 
Poultry Programs, AMS, USDA, Room 3953-S, 1400 Independence Avenue, 
SW., Washington, DC 20250-0259, during regular business hours or can be 
viewed at: http://www.regulations.gov. All comments received will be 
posted without change, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Angela C. Snyder; Research and 
Promotion; Standards, Promotion & Technology Branch; Poultry Programs, 
AMS, USDA, 1400 Independence Avenue, SW., Room 3932-S; Washington, DC 
20250-0256; telephone: (202) 720-4476; fax (202) 720-2930; or e-mail: 
<a href="/cdn-cgi/l/email-protection#6d2c030a0408433e031409081f2d0c001e43181e090c430a021b"><span class="__cf_email__" data-cfemail="acedc2cbc5c982ffc2d5c8c9deeccdc1df82d9dfc8cd82cbc3da">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

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

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The rule is not intended to have a retroactive 
effect and will not affect or preempt any State or Federal law 
authorizing promotion or research relating to an agricultural 
commodity.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Section 14 of the Act allows 
those subject to the Order to file a written petition with the 
Secretary of Agriculture (Secretary) if they believe that the Order, 
any provision of the Order, or any obligation imposed in connection 
with the Order, is not in accordance with the law. In any petition, the 
person may request a modification of the Order or an exemption from the 
Order. 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.

Initial Regulatory Flexibility Act Analysis and Paperwork Reduction Act

    In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 
601-612), AMS has considered the economic impact of this action on the 
small producers that would be affected by this rule. 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.
    According to AEB, approximately 245 producers are subject to the 
provisions of the Order, including paying assessments. Under the 
current Order, producers in the 48 contiguous United States and the 
District of Columbia who own more than 75,000 laying hens each 
currently pay a mandatory assessment of 10 cents per 30-dozen case of 
eggs. Handlers are responsible for collecting and remitting assessments 
to the Board. There are approximately 160 egg handlers who collect 
assessments. Assessments under the program are used by AEB to finance 
promotion, research, and consumer information programs designed to 
increase consumer demand for eggs in domestic and international 
markets. At the current rate of 10 cents per case, assessments generate 
about $20 million in annual revenues. The Order is administered by AEB 
under supervision of the U.S. Department of Agriculture.
    In 13 CFR part 121, the Small Business Administration (SBA) defines 
small agricultural producers as those having annual receipts of no more 
than $750,000 and small agricultural service firms as those having 
annual receipts of no more than $7 million. Under this definition, the 
vast majority of the egg producers that would be affected by this rule 
would not be considered small entities. Producers owning 75,000 or 
fewer laying hens are exempt from this program.
    Given that a laying hen produces approximately 22 dozen eggs per 
year, production from 75,000 laying hens would result in 1.65 million 
dozen eggs. With a wholesale price of $0.965 per dozen, total annual 
receipts would be $1.59 million, which is well above the definition 
used to describe a small farm. The wholesale price of eggs would need 
to drop to approximately $0.45 per dozen before a producer with 75,000 
hens could be classified as a small farm under the SBA definition.
    The present 10-cent assessment is equivalent to approximately 0.28 
percent of the wholesale price of a 30-dozen case of large eggs. An 
assessment rate of 15 cents per 30-dozen case would be equivalent to 
approximately 0.42 percent of the wholesale price of a 30-dozen case of 
large eggs. This wholesale

[[Page 48869]]

price is based on the price per dozen Grade A large egg price reported 
in the ``Weekly Combined Regional Shell Eggs'' report (WA--PY001) 
published by USDA's Poultry Market News and Analysis Branch.
    According to AEB, additional revenue is required in order to 
sustain and expand its programs. This proposed increase is consistent 
with sections 8 and 9 of the Act (7 U.S.C. 2701-2718) that permit AEB 
to recommend an increase in the assessment rate up to 20 cents per case 
and request that a referendum be held if such an increase is supported 
by a scientific study, marketing analysis, or other similar competent 
evidence.
    AEB conducted a marketing analysis demonstrating that a 5-cent 
increase in the assessment rate (to a total of 15 cents) is appropriate 
to effectively strengthen AEB's programs. The marketing analysis 
addressed the need for a funding increase due to the following factors: 
(1) Inflation, including the overall increases in all costs associated 
with doing business since the last increase in AEB's assessment rate in 
1994; (2) AEB's advertising program, including the increased cost of 
advertising expenditures as well as new media outlets; (3) AEB's 
nutrition program, including additional research needed to examine both 
the nutritional benefits of eggs and the relationship between eggs and 
increased serum cholesterol levels and heart disease risk; and (4) 
AEB's food safety program, specifically expanding research to cover 
food safety as the public becomes more concerned about food safety 
issues.
    With the proposed increased assessment, the financial commitment of 
the U.S. egg industry for generic research and promotion activity could 
increase by 50 percent, from approximately $20 million to an estimated 
$30 million annually.
    AEB considered several alternatives, including the status quo of 10 
cents per case, an increase to 20 cents per case, and an increase to 15 
cents per case. AEB ultimately concluded that the status quo would not 
allow AEB even to sustain its programs effectively, and that an 
increase to 15 cents was sufficient to maintain and expand its 
promotion, research, and consumer information programs.
    This rule does not impose additional recordkeeping requirements on 
egg producers or collecting handlers. There are no Federal rules that 
duplicate, overlap, or conflict with this rule.
    In accordance with 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 Order and Rules and Regulations have been approved previously 
under OMB control number 0581-0093. This rule does not result in a 
change to those information collection and recordkeeping requirements.
    We have performed this Initial Regulatory Flexibility Analysis 
regarding the impact of these proposed amendments to the Order and 
Rules and Regulations on small entities, and we invite comments 
concerning potential effects of these amendments on small businesses.

Background

    The Egg Research and Consumer Information Act (7 U.S.C. 2701-2718, 
hereinafter referred to as the ``Act'') established a national egg 
research and promotion program--administered by AEB--that is financed 
through industry assessments and subject to oversight by AMS. This 
program of promotion, research, and consumer information is designed to 
strengthen the position of eggs in the marketplace and to establish, 
maintain, and expand markets for eggs.
    This program is financed by assessments on egg producers owning 
more than 75,000 laying hens. The Egg Research and Promotion Order 
specifies that handlers are responsible for collecting and remitting 
the producer assessments to AEB, reporting their handling of eggs, and 
maintaining records necessary to verify their reports.
    This rule proposes to increase the assessment rate on egg producers 
from 10 cents to 15 cents per case of commercial eggs. Only producers 
in the contiguous United States are subject to the program, and 
producers owning 75,000 or fewer laying hens are exempt from paying 
assessments.
    In order to sustain and expand the promotion, research, and 
consumer information programs at present levels, AEB believes that 
additional revenue is required. The proposed increase is estimated to 
generate $10 million in new revenue, depending upon production levels. 
Currently, AEB collects approximately $20 million per year. A 5-cent 
increase in the assessment rate is expected to increase the total to 
about $30 million per year.
    Section 8 of the Act provides for an assessment rate up to 20 cents 
per case. Section 1250.347 currently provides for an assessment at a 
rate not to exceed 10 cents per 30-dozen case of eggs, or equivalents 
thereof. Any increase from the current 10-cent rate established in the 
Order must be approved by egg producers voting in a referendum. Section 
9 of the Act provides that if AEB determines, based on a scientific 
study, marketing analysis, or other similar competent evidence, that an 
increase in the assessment rate is necessary to effectuate the declared 
policy of the Act, AEB may recommend the increase to the Secretary and 
request that a referendum be held to vote on the assessment increase.

Marketing Analysis and AEB Recommendation

    Consequently, AEB conducted a marketing analysis demonstrating that 
a 5-cent increase in the assessment rate to a total of 15 cents was 
appropriate to effectively strengthen AEB's programs.
    Because of inflation, AEB estimates that an estimated $14.7 million 
would be required to duplicate the same media program in 2008 as was 
conducted for $7.9 million in 1995, when the assessment rate was last 
increased.
    Despite the success of the advertising program, AEB's media budget 
has not kept pace with media inflation. Over the last 10 years, the 
budget has remained relatively flat, averaging roughly $7.9 million 
annually. Meanwhile, the cost of media has steadily increased at the 
rate of 5 percent each year. If AEB's advertising budget matched 
inflation, it would be more than 50 percent larger today than it is, 
and it would reach $22 million in 2017. By not keeping up with 
inflation, each year AEB has been reaching fewer consumers and less 
often.
    Ten years ago, AEB expanded its research to include studies on the 
nutritional benefits of eggs, including satiety and weight control; 
bioavailability of egg nutrients; egg protein and muscle retention in 
the elderly; egg lutein and eye health; egg choline and brain 
development, dietary choline requirements, and the relationship between 
choline and reduction of heart-disease risk; and eggs and school 
performance.
    The expansion of the research programs over the past decade has 
been an essential component of AEB's mission. To continue to fund the 
best and most relevant research projects, AEB needs to increase its 
level of research funding to account for the rising cost of studies 
today compared to 10 years ago, the increased number of research 
topics, and publicizing research findings.
    In addition to research into egg nutrients, AEB has also funded 
research and other programs related to food safety as the public's food 
security concerns have increased. AEB has funded research on 
Salmonella, avian influenza, transportation systems,

[[Page 48870]]

cooking methods, and statistical analyses. Not only do these studies 
deal with current food safety issues, but they also help the egg 
industry prepare for and address potential risks.
    At the March 27, 2008, board meeting, AEB members voted unanimously 
to recommend that the assessment rate be increased from 10 cents to 15 
cents per 30-dozen case of commercial eggs.

Proposed Changes and Referendum

    This rule would amend the Order as well as the implementing Rules 
and Regulations. Section 1250.347 of the Order states that the 
assessment rate is not to exceed 10 cents per 30-dozen case of eggs, 
provided that no more than such assessment shall be made on any case of 
eggs. Section 1250.514 provides for an assessment rate of 10 cents per 
case of commercial eggs handled for the account of each producer, with 
each case being subject to assessment only once. Accordingly, section 
1250.347 of the Order and section 1250.514 of the Rules and Regulations 
would be revised to reflect an assessment rate of 15 cents per case. In 
order to better reflect the provisions of the Act, section 1250.347 of 
the Order would be amended to reflect both the maximum assessment rate 
authorized under the Act as well as the assessment rate itself.
    A 60-day comment period is provided to allow interested parties to 
respond to this proposal. All written comments received by the date 
specified in response to this rule will be considered prior to 
conducting the referendum.
    After an opportunity for public comment, a referendum will be held 
among egg producers not exempt from the Act. Producers engaged in the 
production of commercial eggs during a representative period determined 
by the Secretary will be eligible to vote on the assessment rate change 
recommended by AEB.
    All known eligible egg producers will receive information in the 
mail regarding the referendum.
    The increase in the assessment rate shall become effective if the 
change is approved or favored by not less than two-thirds of the 
producers voting in the referendum, or a majority of such producers if 
they represent not less than two-thirds of the commercial eggs produced 
by those voting.

List of Subjects in 7 CFR Part 1250

    Administrative practice and procedure, Advertising, Agricultural 
research, Eggs and egg products, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble 7 CFR part 1250 is 
proposed to be amended as follows:

PART 1250--EGG RESEARCH AND PROMOTION

    1. The authority citation of part 1250 continues to read as 
follows:

    Authority: 7 U.S.C. 2701-2718 and 7 U.S.C. 2401.

    2. Section 1250.347 is revised to read as follows:


Sec.  1250.347  Assessments.

    Each handler designated in Sec.  1250.349 and pursuant to 
regulations issued by the Board shall collect from each producer, 
except for those producers specifically exempted in Sec.  1250.348, and 
shall pay to the Board at such times and in such manner as prescribed 
by regulation issued by the Board an assessment at a rate of 15 cents 
per 30-dozen case of eggs, or the equivalent thereof, for such expenses 
and expenditures, including provisions for a reasonable reserve and 
those administrative costs incurred by the Department of Agriculture 
after this subpart is effective, as the Secretary finds are reasonable 
and likely to be incurred by the Board and the Secretary under this 
subpart, except that no more than one such assessment shall be made on 
any case of eggs. The assessment rate shall not exceed 20 cents per 
case (or the equivalent of a case) of commercial eggs.
    3. In Sec.  1250.514, the first sentence is revised to read as 
follows:


Sec.  1250.514  Levy of assessments.

    An assessment rate of 15 cents per case of commercial eggs is 
levied on each case of commercial eggs handled for the account of each 
producer. * * *

    Dated: September 21, 2009.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. E9-23150 Filed 9-24-09; 8:45 am]
BILLING CODE 3410-02-P


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