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[Federal Register Volume 72, Number 88 (Tuesday, May 8, 2007)]
[Proposed Rules]
[Pages 26005-26008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-8726]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1210

[Doc. No. AMS-FV-07-0038; FV-07-701]

Watermelon Research and Promotion Plan; Assessment Increase

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to amend the Watermelon Research and 
Promotion Plan (Plan) to increase the assessment rate on producers, 
handlers, and importers of watermelons from four cents to six cents per 
hundredweight. Domestic producers and handlers would pay three cents 
per hundredweight each and importers would pay six cents per 
hundredweight. The increase is provided for under the Plan which is 
authorized by the Watermelon Research and Promotion Act (Act). The 
National Watermelon Promotion Board (Board), which administers the 
Plan, recommended this action to sustain and expand their promotional, 
research, and communications programs.

DATES: Comments must be received by July 9, 2007.

ADDRESSES: Interested persons are invited to submit written comments on 
the internet at: http://www.regulations.gov or to the Research and 
Promotion Branch, Fruit and Vegetable Programs, Agricultural Marketing 
Service (AMS), U.S. Department of Agriculture, Room 0634-S, Stop 0244, 
1400 Independence Avenue, SW., Washington, DC 20250-0244; fax: (202) 
205-2800. All comments should reference the docket number and the date 
and page number of this issue of the Federal Register and will be made 
available for public inspection in the above office during regular 
business hours or can be viewed at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Jeanette Palmer, Marketing Specialist, 
Research and Promotion Branch, Fruit and Vegetable Programs, AMS, USDA, 
1400 Independence Avenue, SW., Room 0634, Stop 0244, Washington, DC 
20250-0244; telephone: (202) 720-9915; or fax: (202) 205-2800; or e-
mail: [email protected].

SUPPLEMENTARY INFORMATION: This rule is issued under the Watermelon 
Research and Promotion Plan [7 CFR part 1210]. The Plan is authorized 
under the Watermelon Research and Promotion Act [7 U.S.C. 4901-4916].

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 rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. The rule is not intended to have retroactive effect and 
will not affect or preempt any other State or Federal law authorizing 
promotion or research relating to an agricultural commodity.
    The Act allows producers, handlers, and importers subject to the 
Plan to file a written petition with the Secretary of Agriculture 
(Secretary) if they believe that the Plan, any provision of the Plan, 
or any obligation imposed in connection with the Plan, is not in 
accordance with the law. In any petition, the person may request a 
modification of the Plan or an exemption from the Plan. The petitioner 
will have the opportunity for a hearing on the petition. Afterwards, an

[[Page 26006]]

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 and Paperwork Reduction Act

    In accordance with the Regulatory Flexibility Act (RFA) [5 U.S.C. 
601 et seq.], the Agricultural Marketing Service (AMS) has considered 
the economic impact of this action on the small producers, handlers, 
and importers 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.
    The Small Business Administration defines, in 13 CFR part 121, 
small agricultural producers as those having annual receipts of no more 
than $750,000 and small agricultural service firms (handlers and 
importers) as those having annual receipts of no more than $6.5 
million. Under these definitions, the majority of the producers, 
handlers, and importers that would be affected by this rule would be 
considered small entities. Producers of less than 10 acres of 
watermelons are exempt from this program. Importers of less than 
150,000 pounds of watermelons per year are also exempt.
    According to the National Watermelon Promotion Board (Board), there 
are approximately 1,301 producers, 442 first handlers, and 346 
importers who are subject to the provisions of the Plan.
    Under the current Plan, domestic producers of 10 acres or more and 
handlers of watermelon each pay a mandatory assessment rate of two 
cents per hundredweight, and importers of more than 150,000 pounds of 
watermelon per year pay an assessment of four cents per hundredweight. 
Assessments under the program are used by the Board to finance 
promotion, research, and educational programs designed to increase 
consumer demand for watermelons in the United States and international 
markets. The assessments at the current four cents per hundredweight 
generate about $1.5 million in annual revenues. The two cents per 
hundredweight assessment rate each for domestic watermelon producer and 
handler was established in April 1990. The four cents per hundredweight 
assessment rate on imported watermelons became effective when the Plan 
was amended in February 1995 to authorize the collection of assessments 
on importers. The Plan is administered by the Board under U.S. 
Department of Agriculture supervision.
    According to the Board, additional revenue is required in order to 
sustain and expand the promotional, research, and communications 
programs. The Board approved the proposed assessment rate increase at 
its February 24, 2007, meeting. This proposed increase is consistent 
with section 1647(f) of the Act that permits changes in the assessment 
rate through notice and comment procedures. Section 1210.341(b) of the 
Plan states that assessment rates shall be fixed by the Secretary in 
accordance with section 1647(f) of the Act. Section 1210.515(a) of the 
Plan states that an assessment of two cents per hundredweight shall be 
levied on all watermelons produced and on all watermelons first handled 
for consumption as human food. It also states that an assessment of 
four cents per hundredweight shall be levied on watermelons imported 
into the U.S. for consumption as human food. Further, not more than one 
assessment on a producer, handler, or importer may be collected on any 
lot of watermelons.
    The Board conducted an inflation analysis based on the current 
assessment rate of four cents per hundredweight starting from 1995. The 
analysis results show that, adjusted for inflation, the 1995 four cents 
per hundredweight total assessment is equivalent to three cents per 
hundredweight for the current program year. On an inflation adjusted 
basis, using 1995 as the base year, the watermelon industry's program 
to support research and promotion activities has lost 25 percent of its 
effective buying power. This erosion in buying power has had a 
significant impact on the industry's ability to compete for market 
share. The cost of media services, research programs, promotional 
opportunities, as well as general administrative costs and fees paid to 
USDA have continually risen. Assessments collected have not kept pace 
with these increasing costs. Movement and sales of watermelon continue 
to grow, however, that growth has not outpaced the negative effects of 
inflation.
    With the proposed increased assessment, the financial commitment of 
the U.S. watermelon industry for generic research and promotion 
activity would increase 50 percent in current dollars. For example, if 
we apply the proposed assessment increase to the 2005-2006 crop year, 
in which collections totaled $1,583,983 on 3,959,957,500 pounds of 
watermelons, the increase in assessments collected would have been 
approximately $791,991. The Board plans to use the additional funds to 
expand promotional activities, and to increase the Board's reserve fund 
over a two-year period to provide for adequate cash flow. By changing 
the assessment rate to six cents per hundredweight, the Board stated 
that it would maintain its research and promotional activities, expand 
its programs, and sustain marketing activities in the future with 
rising cost expenditures.
    The Board estimates the two cents per hundredweight increase in 
assessments would increase the cost to watermelon producers from $16.00 
per truckload of watermelons to $24.00 per truckload of watermelons. At 
Freight on Board (FOB) prices of about $0.14 per pound of watermelons, 
this amounts to a total assessment of 0.00429 percent of the value of a 
truck load of watermelons. This is based on a 40,000 pound net weight 
of watermelons per truck load.
    The Board considered three alternatives prior to the recommendation 
to increase the assessment rate. First, the Board performed several 
cost saving measures as an alternative to increasing the assessment 
rate which included moving to less expensive offices, changes in the 
staff health insurance program, change in independent auditors, and the 
elimination of one professional staff position. The results of the 
savings were over $120,000 which equals approximately 10 percent of the 
Board's domestic revenue for the 2005-2006 crop year.
    The second alternative considered by the Board was a prior attempt 
to increase additional revenue by expanding the handler base for 
watermelons. A referendum was conducted by AMS between December 2001 
and January 2002. The proposed amendment to the Plan requested the 
watermelon industry to expand the program to cover all handlers of 
watermelons which would have included wholesalers, persons who arrange 
the sale or transfer of watermelon (such as brokers) and fresh cut 
processors. The amendment was not approved in referendum. Therefore, 
the Plan continues to cover domestic producers of 10 acres or more, 
first handlers, and importers of 150,000 pounds of watermelon annually.
    The final alternative considered by the Board was the current 
assessment rate proposal. The Board discussed increasing the assessment 
rate by one

[[Page 26007]]

cent per hundredweight for each producer of 10 acres or more, handler, 
and importer of 150,000 pounds of watermelon annually. The one cent 
proposed increase was rejected by the Board on the basis that an 
increase of this size would only return the program to the 1995 
adjusted funding level. In order to sustain and expand the promotional, 
research, and communication programs, the Board decided to propose an 
increase assessment rate of two cents per hundredweight for a total 
assessment rate of six cents per hundredweight (three cents per 
hundredweight paid by producers, three cents per hundredweight paid by 
handlers, and six cents per hundredweight paid by importers of 
watermelons).
    This rule does not impose additional recordkeeping requirements on 
first handlers, producers, or importers of watermelons. Producers of 
fewer than 10 acres of watermelon and importers of less than 150,000 
pounds of watermelon annually are exempt.
    There are no Federal rules that duplicate, overlap, or conflict 
with this rule.
    In accordance with the Office of Management and Budget (OMB) 
regulation 5 CFR part 1320] which implements the Paperwork Reduction 
Act of 1995 [44 U.S.C. Chapter 35], the information collection and 
recordkeeping requirements that are imposed by the Plan have been 
approved previously under OMB control number 0581-0093. This rule does 
not result in a change to the information collection and recordkeeping 
requirements previously approved.
    We have performed this Initial Regulatory Flexibility Analysis 
regarding the impact of this proposed amendment to the Plan on small 
entities, and we invite comments concerning potential effects of this 
amendment on small businesses.

Background

    Under the Plan, the Board administers a nationally coordinated 
program of research, development, advertising, and promotion designed 
to strengthen the position of watermelons in the marketplace, and to 
establish, maintain, and expand markets for watermelons. This program 
is financed by assessments on producers growing 10 acres or more of 
watermelons, handlers of watermelons, and importers of 150,000 or more 
pounds of watermelons per year. The Plan specifies that handlers are 
responsible for collecting and submitting both the producer and handler 
assessments to the Board, reporting their handling of watermelons, and 
maintaining records necessary to verify their reporting(s). Importers 
are responsible for payment of assessments to the Board on watermelons 
imported into the United States through the U.S. Customs Service and 
Border Protection.
    This rule proposes to increase the assessment rate by one cent per 
hundredweight for producers and handlers each, and by two cents per 
hundredweight for importers. Currently, the assessment rate is two 
cents per hundredweight levied on watermelons produced and two cents 
per hundredweight on watermelons handled within the 50 States of the 
United States and four cents per hundredweight on imports of 
watermelon. In order to sustain and expand the promotion, research, and 
communications programs at present levels, the Board contends that 
additional revenue is required. The proposed two cents per 
hundredweight assessment rate increase is estimated to generate 
$750,000-$800,000 in new revenue, depending upon production levels. For 
the 2005-2006 crop year, total production was 3,959,957,500 pounds of 
watermelons resulting in $1,583,983 in assessment collections. Based on 
assessments collected for that crop year, about 75 percent of this 
production total was from domestic assessments, with the remainder from 
imports. The Board states that the proposed assessment rate increase, 
would enable it to expand media services, educational programs, 
research programs, and establish, maintain, and expand domestic and 
foreign markets for watermelons. Some of the additional revenue, the 
Board states, would be used to increase the reserve fund over a two-
year period to provide for adequate cash flow. Also, it is estimated 
that the Board will receive $2.3 million in total assessments with a 
six cents per hundredweight assessment rate on watermelons.
    In addition, the Board, whose members represent all watermelon 
producing states as well as importers, voted to propose the assessment 
rate increase at its February 24, 2007, meeting which was open to the 
public like all other meetings. The vote to recommend the assessment 
increase was 22 in favor and 1 against of the Board members present at 
the meeting. In the case of the one dissenting vote, the producer 
member stated that he opposed the two cents per hundredweight increase; 
however, he would support an increase of one cent per hundredweight. 
The proposed assessment rate of one cent per hundredweight was rejected 
by the Board on the basis that such an increase would only return the 
program to its 1995 inflation adjusted funding level. According to the 
Board, the one cent per hundredweight would not allow the program to 
expand its activities.
    This rule would amend the rules and regulations issued under the 
Plan. This rule would increase the assessment rate by two cents per 
hundredweight. The rate would increase from four cents to six cents per 
hundredweight. Producers of 10 acres or more and handlers of 
watermelons will each pay three cents per hundredweight and importers 
of 150,000 pounds or more of watermelons annually will pay six cents 
per hundredweight. This proposed increase is consistent with section 
1647(f) of the Act that permits changes in the assessment rate through 
notice and comment procedures. Section 1210.341(b) of the Plan states 
that assessment rates shall be fixed by the Secretary in accordance 
with section 1647(f) of the Act. Further, not more than one assessment 
on a producer, handler, or importer may be collected on any lot of 
watermelons. The Board is recommending the proposed assessment rate 
increase based on continued inflation and rising cost expenditures 
since the current assessment rate places budget constraints on 
promotional, research, and communications programs and would result in 
reducing the programs in the future. Accordingly, section 1210.515(a) 
of the Plan would be revised.
    A 60-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments received in response to 
this rule by the date specified would be considered prior to finalizing 
this action.

List of Subjects in 7 CFR Part 1210

    Administrative practice and procedure, Advertising, Consumer 
information, Marketing agreements, Reporting and recordkeeping 
requirements, Watermelon promotion.

    For the reasons set forth in the preamble, Part 1210, Chapter XI of 
Title 7 is proposed to be amended as follows:

PART 1210--WATERMELON RESEARCH AND PROMOTION PLAN

    1. The authority citation for 7 CFR part 1210 continues to read as 
follows:

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

    2. Section 1210.515 (a) is revised to read as follows:

Sec.  1210.515  Levy of assessments.

    (a) An assessment of three cents per hundredweight shall be levied 
on all watermelons produced for ultimate

[[Page 26008]]

consumption as human food, and an assessment of three cents per 
hundredweight shall be levied on all watermelons first handled for 
ultimate consumption as human food. An assessment of six cents per 
hundredweight shall be levied on all watermelons imported into the 
United States for ultimate consumption as human food at the time of 
entry in the United States.
* * * * *

    Dated: May 2, 2007.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
 [FR Doc. E7-8726 Filed 5-7-07; 8:45 am]
BILLING CODE 3410-02-P
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