[Federal Register Volume 62, Number 4 (Tuesday, January 7, 1997)]
[Proposed Rules]
[Pages 942-945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-281]


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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. 62, No. 4 / Tuesday, January 7, 1997 / 
Proposed Rules

[[Page 942]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV-96-985-4 PR]


Spearmint Oil Produced in the Far West; Salable Quantities and 
Allotment Percentages for the 1997-98 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish the quantity of spearmint 
oil produced in the Far West, by class, that handlers may purchase 
from, or handle for, producers during the 1997-98 marketing year. The 
Spearmint Oil Administrative Committee (Committee), the agency 
responsible for local administration of the marketing order for 
spearmint oil produced in the Far West, recommended this rule for the 
purpose of avoiding extreme fluctuations in supplies and prices, and 
thus help to maintain stability in the spearmint oil market.

DATES: Comments must be received by February 6, 1997.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments must be sent in triplicate to 
the Docket Clerk, Fruit and Vegetable Division, AMS, USDA, room 2525, 
South Building, P.O. Box 96456, Washington, D.C. 20090-6456. 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 Office of the Docket Clerk during regular business 
hours.

FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Division, AMS, USDA, 1220 SW Third Avenue, room 369, 
Portland, Oregon 97204; telephone: (503) 326-2043; Fax: (503) 326-7440; 
or Caroline C. Thorpe, Marketing Order Administration Branch, Fruit and 
Vegetable Division, AMS, USDA, room 2525, South Building, P.O. Box 
96456, Washington, D.C. 20090-6456; telephone: (202) 720-5127; Fax: 
(202) 720-5698. Small businesses may request information on compliance 
with this regulation by contacting: Jay Guerber, Marketing Order 
Administration Branch, Fruit and Vegetable Division, AMS, USDA, P.O. 
Box 96456, room 2523-S, Washington, DC 20090-6456; telephone (202) 720-
2491; Fax (202) 720-5698.

SUPPLEMENTARY INFORMATION: This proposed rule is issued under Marketing 
Order No. 985 (7 CFR Part 985), regulating the handling of spearmint 
oil produced in the Far West (Washington, Idaho, Oregon, and designated 
parts of Nevada and Utah). This marketing order is effective under the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the provisions of the marketing order now 
in effect, salable quantities and allotment percentages may be 
established for classes of spearmint oil produced in the Far West. This 
proposed rule would establish the quantity of spearmint oil produced in 
the Far West, by class, that may be purchased from or handled for 
producers by handlers during the 1997-98 marketing year, which begins 
on June 1, 1997. This proposed rule will not preempt any State or local 
laws, regulations, or policies, unless they present an irreconcilable 
conflict with this rule.
    The Act 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 file 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 law and request a modification of the order or to be exempted 
therefrom. A handler is afforded the opportunity for a hearing on the 
petition. After the 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 his or her 
principal place of business, has jurisdiction to review the Secretary's 
ruling on the petition, provided an action is filed not later than 20 
days after date of the entry of the ruling.
    Pursuant to authority contained in sections 985.50, 985.51, and 
985.52 of the order, the Committee recommended the salable quantities 
and allotment percentages for the 1997-98 marketing year at its October 
2, 1996, meeting, and reconfirmed its recommendation following review 
of additional information at its meeting held on November 14, 1996. The 
Committee recommended the establishment of a salable quantity and 
allotment percentage for Scotch spearmint oil with one member opposing 
the motion because he favored the establishment of a higher salable 
quantity and allotment percentage. In a unanimous vote, the Committee 
recommended the establishment of a salable quantity and allotment 
percentage for Native spearmint oil.
    This proposed rule would establish a salable quantity of 996,522 
pounds and an allotment percentage of 55 percent for Scotch spearmint 
oil, and a salable quantity of 1,125,351 pounds and an allotment 
percentage of 56 percent for Native spearmint oil. This proposed rule 
would limit the amount of spearmint oil that handlers may purchase 
from, or handle for, producers during the 1997-98 marketing year, which 
begins on June 1, 1997. Salable quantities and allotment percentages 
have been placed into effect each season since the marketing order's 
inception in 1980.
    The U.S. production of spearmint oil is concentrated in the Far 
West, primarily Washington, Idaho, and Oregon (part of the area covered 
by the marketing order). Spearmint oil is also produced in the Midwest. 
The production area covered by the marketing order accounts for 
approximately 75 percent of the annual U.S. production of both classes 
of spearmint oil.
    When the order became effective in 1980, the United States produced 
nearly 100 percent of the world's supply of Scotch spearmint oil, of 
which approximately 80 percent was produced

[[Page 943]]

in the regulated production area in the Far West. International 
production characteristics have changed in recent years, however, with 
foreign Scotch spearmint oil production contributing significantly to 
world production. Although still a leader in production, the Far West's 
market share has decreased to approximately 65 percent of the world 
total. Thus, in recent marketing years, the Committee has taken a 
different approach in its method of addressing the historical 
fluctuations in supply and price. In conjunction with the goal of 
maintaining price and market stability, the Committee seeks a moderate 
growth rate in terms of total North American market share. The 
Committee's recommendation is intended to find a stable price level 
while keeping Far West Scotch spearmint oil in a competitive and viable 
position in the international market. To that end, the Committee is 
targeting a specific percentage of the North American market share for 
use in its salable quantity and allotment percentage calculations. For 
1997-98, the Committee is targeting 73 percent of the North American 
market, compared to the nearly 65 percent targeted for the 1996-97 
season. Preliminary figures indicate that the Far West Scotch spearmint 
oil market share in North America will reach approximately 60 percent 
in 1996-97, up from 55 percent in 1995-96.
    Records show that the marketing order has contributed extensively 
to the stabilization of grower prices, which prior to 1980 experienced 
wide fluctuations from year to year. Prior to 1980, grower prices for 
Native spearmint oil were historically cyclical. For example, between 
1971 and 1975 the price of Native spearmint oil increased from $3.00 
per pound to $11.00 per pound. In contrast, under the marketing order, 
prices have stabilized between $10.50 and $11.50 per pound for the past 
ten years. With approximately 90 percent of U.S. production of Native 
spearmint oil located in the Far West, the method of calculating the 
Native spearmint oil salable quantity and allotment percentage 
primarily utilizes information on price and available supply as they 
are affected by the estimated trade demand for Far West Native 
spearmint oil.
    The proposed salable quantity and allotment percentage for each 
class of spearmint oil for the 1997-98 marketing year is based upon the 
Committee's recommendation and the data presented below.
(1) Class 1 (Scotch) Spearmint Oil
    (A) Estimated carry-in on June 1, 1997--309,927 pounds. This figure 
is derived by subtracting the estimated 1996-97 marketing year trade 
demand of 900,000 pounds from the revised 1996-97 marketing year total 
available supply of 1,209,927 pounds.
    (B) Estimated North American production (U.S. and Canada) for the 
1997-98 marketing year--1,511,461 pounds. This figure is an estimate 
based on information provided to the Committee by producers and buyers.
    (C) Percentage of North American market targeted--73 percent. This 
figure is an approximate average of the recommended target percentages 
made at each of the five regional producer meetings held throughout the 
Far West production area during the month of September, 1996.
    (D) Total quantity of Scotch spearmint oil needed to reach targeted 
percentage--1,103,367 pounds. This figure is the product of the 
estimated 1997-98 North American production and the targeted 
percentage.
    (E) Minimum amount desired to have on hand throughout the season--
200,000 pounds. Producers at all of the five regional meetings had 
recommended this amount, which continues to reflect the Committee's 
commitment to regain market share by maintaining a minimum quantity on 
hand.
    (F) Total supply required--1,303,367 pounds. This figure is derived 
by adding the minimum desired on hand amount to the total quantity 
required to meet the targeted percentage.
    (G) Additional quantity required--993,440 pounds. This figure 
represents the actual amount of additional or new oil needed to meet 
the Committee's projections, and is computed by subtracting the 
estimated carry-in of 309,440 pounds from the total supply required of 
1,303,367 pounds.
    (H) Total allotment base for the 1997-98 marketing year--1,811,859 
pounds.
    (I) Computed allotment percentage--54.8 percent. This percentage is 
computed by dividing the required salable quantity by the total 
allotment base.
    (J) Recommended allotment percentage--55 percent. This is the 
Committee's recommendation based on the computed allotment percentage.
    (K) The Committee's recommended salable quantity--996,522 pounds. 
This figure is the product of the recommended allotment percentage and 
the total 1997-98 allotment base.
(2) Class 3 (Native) Spearmint Oil
    (A) Estimated carry-in on June 1, 1997--71,764 pounds. This figure 
is derived by subtracting the estimated 1996-97 marketing year trade 
demand of 1,162,500 pounds from the revised 1996-97 marketing year 
total available supply of 1,234,264 pounds.
    (B) Estimated trade demand (domestic and export) for the 1997-98 
marketing year--1,212,500 pounds. This figure represents an average of 
buyer estimates and the amounts recommended at the regional producer 
meetings.
    (C) Salable quantity required from 1997 production--1,140,736 
pounds. This figure is the difference between the estimated 1997-98 
marketing year trade demand and the estimated carry-in on June 1, 1997.
    (D) Total allotment base for the 1997-98 marketing year--2,009,556 
pounds.
    (E) Computed allotment percentage--56.8 percent. This percentage is 
computed by dividing the required salable quantity by the total 
allotment base.
    (F) Recommended allotment percentage--56 percent. This is the 
Committee's recommendation based on the computed allotment percentage.
    (G) The Committee's recommended salable quantity--1,125,351 pounds. 
This figure is the product of the recommended allotment percentage and 
the total 1997-98 marketing year allotment base.
    The salable quantity is the total quantity of each class of oil 
which handlers may purchase from or handle on behalf of producers 
during a marketing year. Each producer is allotted a share of the 
salable quantity by applying the allotment percentage to the producer's 
allotment base for the applicable class of spearmint oil.
    The Committee's recommended Scotch spearmint oil salable quantity 
of 996,522 pounds and allotment percentage of 55 percent are based on 
anticipated supply, demand, and a targeted percentage of the North 
American market during the 1997-98 marketing year. The Committee's 
recommended Native spearmint oil salable quantity of 1,125,351 pounds 
and allotment percentages of 56 percent are based on anticipated supply 
and trade demand during the 1997-98 marketing year. The proposed 
salable quantities are not expected to cause a shortage of spearmint 
oil supplies. Any unanticipated or additional market demand for 
spearmint oil which may develop during the marketing year can be 
satisfied by an increase in the salable quantities. Both Scotch and 
Native spearmint oil producers who produce

[[Page 944]]

more than their annual allotments during the 1997-98 season may 
transfer such excess spearmint oil to a producer with spearmint oil 
production less than his or her annual allotment or put it into the 
reserve pool.
    This proposed regulation, if adopted, would be similar to those 
which have been issued in prior seasons. Costs to producers and 
handlers resulting from this proposed action are expected to be offset 
by the benefits derived from a stable market, a greater market share, 
and possible improved returns. In conjunction with the issuance of this 
proposed rule, the Committee's marketing policy statement for the 1997-
98 marketing year has been reviewed by the Department. The Committee's 
marketing policy statement, a requirement whenever the Committee 
recommends volume regulations, fully meets the intent of the provisions 
as set forth in 7 CFR Part 985.50. Conformity with other USDA 
guidelines has also been reviewed and confirmed.
    The establishment of these salable quantities and allotment 
percentages would allow for anticipated market needs based on 
historical sales, changes and trends in production and demand, and 
information available to the Committee. Adoption of this proposed rule 
would also provide spearmint oil producers with information on the 
amount of oil which should be produced for next season.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (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 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are 8 spearmint oil handlers subject to regulation under the 
marketing order and approximately 250 producers of spearmint oil in the 
regulated production area. Of the 250 producers, approximately 135 
producers hold Class 1 (Scotch) oil allotment base, and approximately 
115 producers hold Class 3 (Native) oil allotment base. Small 
agricultural service firms are defined by the Small Business 
Administration (13 CFR 121.601) as those having annual receipts of less 
than $5,000,000, and small agricultural producers have been defined as 
those whose annual receipts are less than $500,000.
    The Far West spearmint oil industry is characterized by producers 
whose farming operations generally involve more than one commodity, and 
whose income from farming operations is not exclusively dependent on 
the production of spearmint oil. Crop rotation is an essential cultural 
practice in the production of spearmint for weed, insect, and disease 
control. A normal spearmint producing operation would have enough 
acreage for rotation such that the total acreage required to produce 
the crop would be about one-third spearmint and two-thirds rotational 
crops. An average spearmint producing farm would thus have to have 
considerable more acreage than would be planted to spearmint during any 
given season. To remain economically viable with the added costs 
associated with spearmint production, most spearmint producing farms 
would fall into the category of large businesses.
    Based on the Small Business Administration's definition of small 
entities, the Committee estimates that none of the eight handlers 
regulated by the order would be considered small entities as all are 
national and multinational corporations involved in the buying and 
selling of essential oils and the products of such essential oils. The 
Committee also estimates that 17 of the 135 Scotch spearmint oil 
producers and 10 of the 115 Native spearmint oil producers would be 
classified as small entities. Thus, a majority of handlers and 
producers of Far West spearmint oil may not be classified as small 
entities.
    This proposed rule would establish the quantity of spearmint oil 
produced in the Far West, by class, that handlers may purchase from, or 
handle for, producers during the 1997-97 marketing year. The committee 
recommended this rule for the purpose of avoiding extreme fluctuations 
in supplies and prices, and thus help to maintain stability in the 
spearmint oil market. This action is authorized by the provisions of 
sections 985.50, 985.51 and 985.52 of the order.
    The small spearmint oil producers generally are not extensively 
diversified and as such are more at risk to market fluctuations. Such 
small farmers generally need to market their entire annual crop and do 
not have the luxury of having other crops to cushion seasons with poor 
spearmint oil returns. Conversely, large diversified producers have the 
potential to endure one or more seasons of poor spearmint oil markets 
because incomes from alternate crops could support the operation for a 
period of time. Being reasonably assured of a stable price and market 
provides small producing entities with the ability to maintain proper 
cash flow and to meet annual expenses. Thus, the market and price 
stability provided by the order potentially benefit the small producer 
more than such provisions benefit large producers. Even though a 
majority of handlers and producers of spearmint oil may not be 
classified as small entities, the volume control feature of this order 
has small entity orientation.
    Records show that the marketing order has contributed extensively 
to the stabilization of grower prices, which prior to 1980 experienced 
wide fluctuations from year to year. Prior to 1980, grower prices for 
Native spearmint oil were historically cyclical. For example, between 
1971 and 1975 the price of Native spearmint oil increased from $3.00 
per pound to $11.00 per pound. In contrast, under the marketing order, 
prices have stabilized between $10.50 and $11.50 per pound for the past 
ten years.
    Alternatives to this proposal included not regulating the handling 
of spearmint oil during the 1997-98 marketing year, and recommending 
either higher or lower salable quantities and allotment percentages. 
The Committee reached its recommendation to establish salable 
quantities and allotment percentages for both classes of oil after 
careful consideration of all available information, and believe that 
the levels recommended will achieve the objectives sought. Without any 
regulations in effect, the Committee believes the industry would return 
to the pattern of cyclical prices of prior years, as well as suffer the 
potentially price depressing consequence that a release of the nearly 
1,300,000 pounds of spearmint oil reserves would have on the market. 
According to the Committee, higher or lower salable quantities and 
allotment percentages would not achieve the intended balance between 
market and price stability and market share maintenance and growth.
    Annual salable quantities and allotment percentages have been 
issued for both classes of spearmint oil since the order's inception. 
Reporting and recordkeeping requirements have remained the same for 
each year of regulation. Accordingly, this action would not impose any 
additional reporting or recordkeeping requirements on either small or 
large spearmint oil producers and handlers. All reports and forms 
associated with this program are reviewed periodically in order to 
avoid unnecessary and duplicitous

[[Page 945]]

information collection by industry and public sector agencies. The 
Department has not identified any relevant Federal rules that 
duplicate, overlap, or conflict with this proposed rule.
    Finally, the Committee's meetings were widely publicized throughout 
the spearmint oil industry and all interested persons were invited to 
attend and participate on all issues. Interested persons are also 
invited to submit information on the regulatory and informational 
impacts of this action on small businesses.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments received within the 
comment period will be considered before a final determination is made 
on this matter.

List of Subjects in 7 CFR Part 985

    Marketing agreements, Oils and fats, Reporting and recordkeeping 
requirements, Spearmint oil.

    For the reasons set forth in the preamble, 7 CFR Part 985 is 
proposed to be amended as follows:

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL 
PRODUCED IN THE FAR WEST

    1. The authority citation for 7 CFR Part 985 continues to read as 
follows:

    Authority: 7 U.S.C. 601-674.

    2. A new Sec. 985.216 is added to read as follows:

[Note: This section will not appear in the Code of Federal 
Regulations.]


Sec. 985.216   Salable quantities and allotment percentages--1997-98 
marketing year.

    The salable quantity and allotment percentage for each class of 
spearmint oil during the marketing year beginning on June 1, 1997, 
shall be as follows:
    (a) Class 1 (Scotch) oil--a salable quantity of 996,522 pounds and 
an allotment percentage of 55 percent.
    (b) Class 3 (Native) oil--a salable quantity of 1,125,351 pounds 
and an allotment percentage of 56 percent.

    Dated: December 31, 1996.
Robert C. Keeney,
Director, Fruit and Vegetable Division.
[FR Doc. 97-281 Filed 1-6-97; 8:45 am]
BILLING CODE 3410-02-P