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###### Department of Agriculture

###### Agricultural Marketing Service

          - 7 CFR Part 1207
          - [Doc. No. AMS-SC-22-0041]

# AGENCY:

Agricultural Marketing Service, USDA.

# ACTION:

Proposed rule.

# SUMMARY:

This proposed rule would implement recommendations from the National Potato Promotion Board (Board) to change its membership and organization by revising the formula used to determine the number of producer and importer seats on the Board, reducing the maximum number of importer seats on the Board, and indefinitely suspending the Administrative Committee. In addition to these Board-recommended changes, the U.S. Department of Agriculture (USDA) would make several non-substantive changes to clarify the start of the term of office for Board members and modernize the Board's procedures. The Board administers the Potato Research and Promotion Plan (Plan) with oversight by the Agricultural Marketing Service (AMS).

# DATES:

Comments must be received by October 5, 2023.

# ADDRESSES:

                        Interested persons are invited to submit written comments concerning this proposed rule. Comments may be mailed to the Docket Clerk, Market Development Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-0237; Fax: (202) 720-8938; or submitted electronically by Email:                         *MDDComments@usda.gov;*                         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**                        . All comments will be made available for public inspection in the Office of the Docket Clerk during regular business hours or can be viewed at                         *https://www.regulations.gov.*                         Comments submitted in response to this proposed rule will be included in the rulemaking record and will be made available to the public. Please be advised that the identity of the individuals or entities submitting the comments will be made public.                    

# FOR FURTHER INFORMATION CONTACT:

                        Alexandra Caryl, Branch Chief, Mid-Atlantic Region Branch, Market Development Division, Specialty Crop Program, AMS, USDA, STOP 0244, 1400 Independence Avenue SW, Room 1406-S, Washington, DC 20250-0244; Telephone: (202) 720-8805; or Email:                         *Alexandra.Caryl@usda.gov.*

# SUPPLEMENTARY INFORMATION:

This proposed rule affecting the Plan (7 CFR part 1207) is authorized under the Potato Research and Promotion Act of 1971 (Act) (7 U.S.C. 2611-2627).

## Executive Orders 12866, 13563, and 14094

USDA is issuing this proposed rule 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 rule 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 section 6 of the Executive Order.

## Executive Order 13175

This action has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. AMS has assessed the impact of this proposed rule on Indian Tribes and determined that this rule would not have Tribal implications that require consultation under Executive Order 13175. AMS hosts a quarterly teleconference with Tribal leaders where matters of mutual interest regarding the marketing of agricultural products are discussed. Information about the proposed changes to the regulations will be shared during an upcoming quarterly call, and Tribal leaders will be informed about the proposed revisions to the regulation and the opportunity to submit comments. AMS will work with the USDA Office of Tribal Relations to ensure meaningful consultation is provided as needed with regard to these proposed changes to the Plan.

## 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 administrative proceedings must be exhausted before parties may file suit in court. Under sec. 311 of the Act (7 U.S.C. 2620), a person subject to the Plan may file a petition with USDA stating that the Plan, any provision of the Plan, or any obligation imposed in connection with the Plan, is not in accordance with law and requesting a modification of the Plan or to be exempted therefrom. Such person is afforded the opportunity for a hearing on the petition. Thereafter, USDA will issue a ruling on the petition. The Act provides that the district courts of the United States for any district in which the petitioner resides or conducts business shall have jurisdiction to review a final ruling on the petition, if the petitioner files a complaint for that purpose not later than 20 days after the date of the entry of USDA's final ruling.

## Background

                    Under the Plan, which became effective on March 9, 1972, the Board administers a nationally coordinated program of research, development, advertising, and promotion designed to strengthen potatoes' competitive position and expand domestic and foreign markets for potatoes and potato products. This program is financed by assessments on handlers and importers of potatoes and potato products.                          ( print page 60600)    

This proposed rule would modify the membership of the Board by revising the formula to determine the number of producer and importer seats on the Board. This action would increase the current threshold from one member seat per five million hundredweight pounds of potatoes produced or imported to one seat per 10 million hundredweight for both producer and importer seats. This action would further revise importer membership by reducing the maximum number of importer seats from five to two. Additionally, the action would indefinitely suspend the Administrative Committee. Finally, this proposed rule would clarify the start date of the term of office for Board members and modernize certain Board procedures relating to the submission of votes and ballots.

The Board unanimously recommended the proposed changes to its membership and the indefinite suspension of the Administrative Committee at a public meeting on March 9, 2022. Board members present for the vote represented domestic producers, importers, and the public, and the recommendations incorporated industry feedback collected by the Board over a three-year period.

## Board Recommendation To Change Membership Rules

Section 1207.320(b) and (c) of the Plan provides the formula used to determine the number of producer and importer seats on the Board. Under this formula, one seat is created for every five million hundredweight of potatoes produced or imported. Therefore, as more potatoes are produced and imported, the Board has more seats.

The Board has encountered significant challenges in filling Board member seats. First, since the Board's inception, the potato industry has experienced both increased production and consolidation. Since the 1970s when the Board was created, production of potatoes in the U.S. as well as imports from Canada and other countries have increased substantially. At the same time, the number of commercial potato farmers and importers has decreased significantly. Accordingly, the number of seats has grown but there are fewer eligible producers and importers to fill them. Second, Board members are volunteers, nominated by peers to represent their State or importer sector. To be a member, domestic producers and importers use time otherwise spent with their businesses to travel to meetings and participate in committees and decision making. Board members are also expected to communicate the activities of the Board to their constituencies and recruit future Board members. While service as Board members is important, it is time-consuming.

As a result of these challenges, the Board in recent years has typically had approximately 125 total seats, of which only about 100 have been filled. Therefore, the Board has experienced roughly 25 vacancies each year. The proposal would increase the threshold from one member seat per five million hundredweight pounds of potatoes produced or imported to one seat per 10 million hundredweight for both producer and importer seats. With the proposed changes, the Board expects the number of member seats to reduce to 80.

Section 308 of the Act (7 U.S.C. 2617(b)) and §§ 1207.320(c) and 1207.322(d) of the Plan currently allow for a maximum of five importer seats on the Board. Since importers started paying assessments in 1991, the Board has always included the maximum of five importer member seats. Like their domestic producer counterparts, however, potato importers continue to experience industry consolidation. According to Customs and Border Protection data, in 2022 there were only 10 importers with annual receipts above the Small Business Administration's (SBA) threshold of $34 million. The Board has not filled all five positions in the last 10 years because of the small number of continuously active importers. Given that members serve three-year terms and cannot serve more than two consecutive terms, along with the small number of importers, it is reasonable to decrease the maximum number of importers from five to two. Additionally, the Board conducted extensive outreach to affected stakeholders and received their support for the change, as evidenced by the unanimous vote for this change.

The initial request for these proposed changes came from domestic producers and importers. Since 2020, the Board has met with various State organizations across the country to discuss the proposed changes. USDA and members of industry also participated in numerous public meetings conducted by the Board to discuss the chronic vacancies experienced by the Board as a result of its current size and structure. The proposed solution developed by the Board reflects the input from these stakeholders.

## Board Recommendation To Suspend the Administrative Committee

Section 1207.507 of the Plan establishes an Administrative Committee composed of 38 producer members, one importer member, and the public member, as provided for in the Board's bylaws. The Administrative Committee is selected annually. The Administrative Committee acts for the Board in implementing marketing research, development, advertising, and/or promotion activities as directed by the Board and is charged with developing and submitting to USDA for approval specific programs or projects. The Administrative Committee also acts for the Board in authorizing contracts or agreements for the development and carrying out of such programs or projects and the payment of the costs thereof with funds collected pursuant to the Plan. Finally, the Administrative Committee acts for the Board in contracting with cooperating agencies for the collection of assessments pursuant to the Plan.

                    Due to the proposed changes to the Board's membership, which would reduce membership seats to approximately 80, the Board believes the Administrative Committee is no longer needed. Currently, the Board uses the Administrative Committee like a smaller Board that meets twice a year, while the full Board only meets once. It is easier and cheaper for the Administrative Committee to convene and conduct business because of its reduced size. While the Board, with the proposed changes, would still be larger than the current Administrative Committee, the reduced membership under the proposed changes allows the full Board to meet in lieu of the Administrative Committee. Meeting more frequently addresses a major industry concern that only members of committees, which make up the Administrative Committee, have sufficient interaction with staff to fully understand the programs and activities the Board implements. Although meeting more frequently may require a greater time commitment from Board members, the Board believes the benefits of this change would outweigh any additional burden on members. Furthermore, as explained in the next section, USDA proposes to amend the regulations to permit voting and balloting via electronic methods, which is expected to increase the efficiency of the Board's operations and make it easier for members to participate. By reducing the Board size to a more reasonable number of members, the Board hopes to include all members on committees to promote Board member interaction and involvement. Therefore, the proposed changes would indefinitely suspend the Administrative Committee.                          ( print page 60601)    

## USDA Proposed Changes

Under § 1207.321(a), the term of office of Board members starts on July 1, or such other date as may be specified in the regulations. In 1973, USDA added § 1207.504, which provided that the term of office would instead start on April 1. In 1984, § 1207.504 was amended to require the term of office to start on March 1. Since then, each member's term has started on March 1. USDA proposes to change the start date in § 1207.321(a) from July 1 to March 1 to match § 1207.504 and be consistent with the current practice of the Board.

In § 1207.325(c), the Plan provides that Board members may vote on non-controversial matters and matters of an emergency nature when there is not enough time to call an assembled meeting by mail, telegraph, or telephone. USDA proposes changing this language to remove the reference to telegraph as a means for voting and to allow for voting by mail, electronic mail, facsimile, or any other means of communication. In § 1207.503(a), (b), and (c), the Plan provides that producers and importers may nominate Board members at meetings or by mail ballots. USDA proposes changing this language to allow ballots to be submitted by mail, electronic mail, facsimile, or any other means of communication. These proposed changes would modernize the sections and increase accessibility to the voting and balloting processes by providing additional options.

## Initial Regulatory Flexibility Analysis

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis. The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions so that small businesses will not be unduly or disproportionately burdened. The RFA requires, where feasible, an estimate of the number of small businesses affected by the rule. This regulatory flexibility analysis estimates a proportion of small businesses where it is not feasible to estimate a number.

The Small Business Administration (SBA) has established size standards that determine whether a business entity is a small business. The size standards are based on the entity's economic activity, or industry, and generally use the North American Industry Classification System (NAICS). The size standards are expressed in annual receipts in millions of dollars or in number of employees, and indicate the maximum allowed for an entity to be considered a small business.

The SBA defines small potato producers as those having annual receipts equal to or less than $4.25 million (Potato Farming, NAICS code 111211). Small agricultural service firms (handlers and importers) are defined as those having annual receipts equal to or less than $34 million (Postharvest Crop Activities, NAICS code 115114) (13 CFR 121.201). These were the numbers in effect when this initial regulatory flexibility analysis was prepared in May 2023.

According to the Board, in 2021 there were approximately 1,500 producers and 955 handlers of potatoes. Since data was not available on the number of producers that are small businesses according to the SBA standard, this analysis computes an estimate of the number of small farms using census data from the USDA's National Agricultural Statistics Service (NASS). Producers that pay Board assessments have a minimum of five acres of potatoes. The 2017 Agricultural Census (the most recent census data available) reported 2,420 farms with five or more harvested acres of potatoes, which is reasonably close to the Board estimate of 1,500 producers that paid assessments in 2021.

NASS reported a 2022 U.S. potato crop value of $5,069,511,000 and 895,600 harvested acres (the most recent annual data available). The estimated average value per harvested acre is $5,660 (obtained by dividing the crop value of $5,069,511,000 by the number of acres, 895,600). Thus, on average, a farm would have to harvest 751 or fewer acres of potatoes to meet the SBA's definition of a small business (obtained by dividing the SBA threshold of $4.25 million by the estimated 2022 average value per acre, $5,660).

According to the 2017 Agricultural Census, out of the 2,420 potato farms with five or more harvested acres, 2,030 farms (84 percent) harvested 749 or fewer acres, very close to the 751 or fewer acres in the previous computation. Based on these computations, and assuming a normal distribution, a large majority of potato farms paying assessments to the Board are small businesses according to SBA criteria.

As noted above, the SBA threshold size for a small agricultural service business is $34 million in annual sales. The Board estimate of the number of potato handlers in 2021 was 955. Dividing the $5.07 billion NASS crop revenue estimate by 955 yields an annual estimate of potato sales per handler of approximately $5.3 million (farm level value), which is well below $34 million, the SBA threshold size for a small agricultural service business.

Potato handlers perform various procedures to get the potatoes to market, including grading, sorting, packaging, and shipment. What handlers are paid can be estimated by obtaining an annual average shipping point price for potatoes from AMS Market News. AMS shipping point prices capture the prices received by shippers (handlers) after buying potatoes from growers, and then grading, sorting, packaging, and shipping. The 2022 average AMS shipping point price received for potatoes ($0.20 per pound) is 55 percent higher than the 2022 average annual NASS price of $0.129 per pound received by growers. Adding 55 percent to the $5.3 million potato sales per handler at the farm level yields an estimate of $8.2 million average annual sales at the handler level, which is also well below the SBA small business threshold size of $34 million or less in annual sales. Assuming a normal distribution, a majority of potato handlers are small agricultural service businesses, according to SBA criteria.

Based on a review of 2022 potato import data from U.S. Customs and Border Protection, there were approximately 140 importers. Of those 140 importers, 130 (93 percent) had potato imports valued at $34 million or less, the SBA size threshold for small agricultural service firms. Therefore, 130 potato importers are small businesses in terms of potato import value, using SBA business size criteria.

This proposal would amend §§ 1207.320, 1207.321, 1207.322, 1207.325, and 1207.503, and suspend § 1207.507. The changes would modify the membership of the Board by revising the formula to determine the number of seats on the Board and reducing the maximum number of importer seats on the Board. The changes would also indefinitely suspend the Administrative Committee, clarify the start date of the term of office of Board members, and modernize the Board's voting and balloting procedures.

                    This proposed rule would not impose any new costs on producers, handlers, or importers. This proposal would also not impose any additional reporting, recordkeeping, or information collection requirements on affected entities. The proposed changes are administrative in nature and would allow the Board to more effectively carry out the requirements of the Plan while potentially reducing costs and increasing participation. With these                           ( print page 60602)                        changes, fewer individuals would be required to attend meetings, reducing the time burden and costs associated with traveling and attending meetings. Further, modernizing the Board's procedures to authorize additional methods for casting votes and ballots could help increase participation.                

The Board considered taking no action and continuing to experience significant membership vacancies. The Board decided against this option because vacancies have become pervasive. Therefore, these alternatives were rejected.

As with all Federal promotion programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this proposed rule.

AMS is committed to complying with the E-Government Act to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to government information and services, and for other purposes.

Regarding outreach efforts, all the Board's meetings, including the March 9, 2022, meeting during which the Board recommendations relevant to this action were discussed, are open to the public and interested persons are invited to participate and express their views. No concerns were raised in these meetings about the changes proposed in this document.

We have performed this initial regulatory flexibility analysis regarding the impact of this proposed action on small entities, and we invite comments concerning potential effects of this action on small businesses.

While this proposed rule as set forth below has not yet received the approval of USDA, it has been determined that it is consistent with and would effectuate the purposes of the Act.

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 rule will be considered prior to finalizing this action.

# List of Subjects in 7 CFR Part 1207

      - Advertising
      - Agricultural research
      - Potatoes
      - Reporting and recordkeeping requirements

For the reasons stated in the preamble, the Agricultural Marketing Service proposes to amend 7 CFR part 1207 as follows:

# PART 1207—POTATO RESEARCH AND PROMOTION PLAN

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

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

2. Amend § 1207.320 by revising paragraphs (b) and (c) to read as follows: 

§ 1207.320

* * * * *

(b) Producer membership upon the Board shall be determined on the basis of the potato production reported in the latest Crop Production Annual Summary Report issued by the National Agricultural Statistics Service of the U.S. Department of Agriculture. If a State's potato production data is not provided by the National Agricultural Statistics Service, the Board may use an alternative data source that reliably reflects potato production in the United States. Unless the Secretary, upon recommendation of the Board, determines an alternate basis, for each 10 million hundredweight of such production, or major fraction thereof, produced within each State, such State shall be entitled to one member. However, each State shall initially be entitled to at least one member.

(c) The number of importer member positions on the Board shall be based on the hundredweights of potatoes, potato products equivalent to fresh potatoes, and seed potatoes imported into the United States but shall not exceed two importer members. Unless the Secretary, upon recommendation of the Board, determines an alternate basis, there shall be one importer member position for each 10 million hundredweight, or major fraction thereof, of potatoes, potato product equivalents, and seed potatoes imported into the United States.

* * * * *

3. Amend § 1207.321 by revising paragraph (a) to read as follows: 

§ 1207.321

(a) The term of office of Board members shall be 3 years, beginning March 1, or such other beginning date as may be approved pursuant to regulations.

* * * * *

4. Amend § 1207.322 by revising paragraph (d) to read as follows: 

§ 1207.322

* * * * *

(d) The importer members shall be nominated by importers of potatoes, potato products and/or seed potatoes. The number of importer members on the Board shall be announced by the Secretary and shall not exceed two members. The Board may call upon organizations of potato, potato products and/or seed potato importers to assist in nominating importers for membership on the Board. If such organizations fail to submit nominees or are determined by the Board to not adequately represent importers, then the Board may conduct meetings of importers to nominate eligible importers for Board member positions. In determining if importer organizations adequately represent importers, the Board shall consider:

(1) How many importers belong to the association;

(2) What percentage of the total number of importers is represented by the association;

(3) Is the association representative of the potato, potato product, and seed potato import industry;

(4) Does the association speak for potato, potato product, and seed potato importers; and

(5) Other relevant information as may be warranted.

* * * * *

5. Amend § 1207.325 by revising paragraph (c) to read as follows: 

§ 1207.325

* * * * *

(c) For routine and noncontroversial matters which do not require deliberation and the exchange of views, and for matters of an emergency nature when there is not enough time to call an assembled meeting, the Board may act upon a majority of concurring votes of its members cast by mail, telephone, electronic mail, facsimile, or any other means of communication. Any vote cast by telephone shall be confirmed promptly in writing.

6. Amend § 1207.503 by revising paragraphs (a), (b), and (c) to read as follows: 

§ 1207.503

(a) Pursuant to § 1207.322 of the plan, the Board shall assist producers in producing sections or States each year to nominate producer members for the Board. Such nominations may be conducted at meetings or with ballots submitted by mail, electronic mail, facsimile, or any other means of communication. One individual shall be nominated for each position to become vacant. A list of nominees shall be submitted to the Secretary for consideration by November 1 of each year.

                        (b) Pursuant to § 1207.322 of the plan, the Board shall assist importers each year to nominate importer members for                               ( print page 60603)                            the Board. Such nominations may be conducted at meetings or with ballots submitted by mail, electronic mail, facsimile, or any other means of communication.                    

(c) Nomination meetings or balloting by mail, electronic mail, facsimile, or any other means of communication shall be well publicized with notice given to producers, importers, and the Secretary at least 10 days prior to each meeting or distribution of ballots.

* * * * *

§ 1207.507

7. Stay § 1207.507 indefinitely. 

Erin Morris,

Associate Administrator, Agricultural Marketing Service.

[FR Doc. 2023-19003 Filed 9-1-23; 8:45 am]

BILLING CODE 3410-02-P