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[Federal Register Volume 76, Number 16 (Tuesday, January 25, 2011)]
[Proposed Rules]
[Pages 4254-4258]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1427]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Doc. No. AMS-FV-10-0090; FV10-989-3 PR]

Raisins Produced From Grapes Grown in California; Increased 
Assessment Rate

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would increase the assessment rate 
established for the Raisin Administrative Committee (committee) for the 
2010-11 and subsequent crop years from $7.50 to $14.00 per ton of free 
tonnage raisins acquired by handlers and reserve tonnage raisins 
released or sold to handlers for use in free tonnage outlets. The 
committee locally administers the marketing order which regulates the 
handling of California raisins produced from grapes grown in 
California. Assessments upon raisin handlers are used by the committee 
to fund reasonable and necessary expenses of

[[Page 4255]]

the program. The 2010-11 crop year began August 1 and ends July 31. No 
volume regulation will be implemented for the 2010-11 crop year, and no 
reserve pool will be established for this crop. Some committee expenses 
usually covered by reserve pool revenues must therefore be covered by 
handler assessments, necessitating an increased assessment rate. The 
proposed $14.00 per ton assessment would remain in effect indefinitely 
unless modified, suspended, or terminated.

DATES: Comments must be received by February 4, 2011.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938, or Internet: http://www.regulations.gov. 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 
during regular business hours, or can be viewed at: http://www.regulations.gov. All comments submitted in response to this rule 
will be included in the 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 on the Internet at 
the address provided above.

FOR FURTHER INFORMATION CONTACT: Terry Vawter, Senior Marketing 
Specialist, or Kurt J. Kimmel, Regional Manager, California Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 
487-5906; or E-mail: Terry.Vawter@ams.usda.gov or 
Kurt.Kimmel@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Antoinette Carter, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 
Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237; 
Telephone: (202) 720-2491, Fax: (202) 720-8938, or E-mail: 
Antoinette.Carter@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 989, both as amended (7 CFR part 989), 
regulating the handling of raisins produced from grapes grown in 
California, hereinafter referred to as the ``order.'' The 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 (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Under the marketing order now in effect, California 
raisin handlers are subject to assessments. Funds to administer the 
order are derived from such assessments. It is intended that the 
assessment rate as proposed herein would be applicable to all 
assessable raisins beginning on August 1, 2010, and continue until 
amended, suspended, or terminated.
    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 USDA 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. Such 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA 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 USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This rule would increase the assessment rate established for the 
committee for the 2010-11 and subsequent crop years from $7.50 to 
$14.00 per ton of free tonnage California raisins acquired by handlers 
and reserve raisins tonnage raisins released or sold to handlers for 
use in free tonnage outlets.
    Sections 989.79 and 989.80, respectively, of the order provide 
authority for the committee, with the approval of the USDA, to 
formulate an annual budget of expenses and collect assessments from 
handlers to administer the program. The members of the committee are 
producers and handlers of California raisins. They are familiar with 
the committee's needs and with costs for goods and services in their 
local area, and are, thus, in a position to formulate an appropriate 
budget and assessment rate. The assessment rate is formulated and 
discussed in a public meeting. Thus, all directly affected persons have 
an opportunity to participate and provide input.
    Section 989.79 also provides authority for the committee to 
formulate an annual budget of expenses likely to be incurred during the 
crop year in connection with reserve raisins held for the account of 
the committee. A certain percentage of each year's raisin crop may be 
held in a reserve pool during years when volume regulation is 
implemented to help stabilize raisin supplies and prices. The remaining 
``free'' percentage may be sold by handlers to any market. Reserve 
raisins are disposed of through various programs authorized under the 
order. Reserve pool expenses are deducted from proceeds obtained from 
the sale of reserve raisins, as are costs to cover the Export 
Replacement Offer (ERO) program, which supports handler exports in 
various foreign markets. Net proceeds are returned to the pool's equity 
holders, primarily producers.

The Committee Formulates Two Budgets Initially

    Prior to each crop year, the committee formulates two distinct 
budgets: one which envisions volume regulation during the upcoming 
season, and another which does not. This is a practical contingency 
plan, since the crop year begins several months prior to the 
committee's consideration of a recommendation for volume regulation, 
which cannot be made before the crop's size can be estimated.
    When volume regulation is recommended, the committee adopts an 
administrative budget funded by handler assessments, and a reserve pool 
budget funded by the current year's reserve pool. Thus, some committee 
costs, some variable and some fixed, may be shared by the two revenue 
sources or allocated to one or the other. Variable costs solely 
attributed to the reserve budget include such expenses as insurance 
policies for committee-owned raisin bins and on stacks of reserve 
raisins, and reserve raisin hauling costs. Variable costs which are 
attributable solely to the administrative budget include such expenses 
as costs for committee and staff travel, or software and programming 
costs, etc. Because of the nature of these variable expenses, they can 
be changed or redirected without significant impact on either budget, 
if necessary.
    On the other hand, fixed costs are less flexible, and, thus, cannot 
be readily changed from one accounting period to another. Because these 
are ``sunk'' costs, like rent, salaries and other related personnel 
costs, utilities, etc., they may be attributable to both the reserve 
and the administrative budget, depending on the nature of the expense. 
In the short

[[Page 4256]]

term of one crop year, these fixed costs generally remain fixed costs.
    When volume regulation is not implemented, the committee funds 
program operations with an administrative budget funded only from 
handler assessments, where some expenses associated with a reserve pool 
are eliminated or reduced from the combined administrative and reserve 
program budget.

The Committee Recommended Two Budgets Initially

    The committee initially met on July 22, 2010, and recommended two 
2010-11 crop year budget scenarios to accommodate both situations, 
because it was not known at that time whether volume regulations would 
be implemented.
    The first budget scenario recommended was premised on the 
assumption that volume regulation would be implemented. Under this 
scenario, the committee recommended an administrative budget of 
expenses totaling $2,245,900, and a reserve pool budget of expenses 
totaling $2,530,700. The assessment rate would remain unchanged at 
$7.50 per ton. The assessment rate applied to the estimated 
acquisitions of raisins by handlers of 330,640 tons would provide 
adequate revenue to fund the shared administrative and reserve budgets 
(salaries, administrative expenses, research, compliance activities, 
industry outreach), and those costs exclusively funded by the reserve 
budget, including: insurance on raisin bins and reserve raisins, 
hauling of reserve raisins and reserve raisin bins, as well as bin 
repair and maintenance. Total expenses of this budget scenario equal 
$4,776,600, not including $233,900 set aside as a financial reserve, 
bringing the total budget to $5,010,500.
    The second budget scenario recommended was based on the premise 
that volume regulation would not be implemented for the 2010-11 season. 
Under this scenario, various expenses typically split between the 
reserve pool budget and the administrative budget would be funded by 
the administrative budget because the activities continue, even in the 
absence of a reserve program. These expenses include salaries, bin 
maintenance costs, export consultants hired to assist the committee in 
administering USDA's Market Access Program (MAP) funds, etc. However, 
it should be noted that even some salaries would be subject to 
reduction or elimination if no reserve program were in place after the 
2010-2011 crop year. In the long term, even fixed costs such as these 
become variable costs.
    In addition, some expense categories would be eliminated in the 
absence of a reserve program. These expenses include: insurance for 
bins and reserve raisins, reserve raisin hauling, and the committee's 
Market Incentive Program (MIP) and the Industry Marketing Promotion 
Fund (IMPF).
    Other expenses which have been reduced include: travel for 
committee and staff members, software and programming costs, and 
generic marketing efforts in foreign countries.
    The administrative budget expenses total $4,423,500 not including a 
smaller financial reserve of $205,460, bringing the total 
administrative budget to $4,628,960; necessitating a higher assessment 
rate of $14.00 per ton to cover the proposed expenses, as unanimously 
recommended by the committee.

Committee Consideration of Volume Regulation

    The committee met on October 5, 2010, and determined that volume 
regulation is not warranted for the 2010-11 crop year because the 
calculated volume regulation formula resulted in 100 percent free 
tonnage and zero percent reserve tonnage. Without volume regulation, 
the committee's relevant recommendation is the July 22, 2010, proposed 
administrative budget of $4,628,960, along with an increased assessment 
rate of $14.00 per ton.
    In developing this budget, the committee reviewed and identified 
those expenses that were considered reasonable and necessary to 
continue operation of the raisin marketing order program. As noted 
previously, several costs normally associated with administering a 
reserve pool would be eliminated such as insurance coverage ($98,700); 
raisin hauling costs ($65,000), and 2011-2012 MIP/IMPF costs (typically 
$4.3 million each year). These costs would be unnecessary in the 
absence of a reserve pool.
    Some expenses traditionally split between the administrative and 
reserve pool budgets would be reduced and funded through the 
administrative budget. For example, total office and field staff travel 
related to reserve and administrative activities, budgeted at $66,200 
($33,100 allocated to the reserve budget and an additional $33,100 
allocated to the administrative budget), would be reduced to $48,000. 
Other reduced expenses include: Reduction in costs for outside counsel 
approved by USDA for personnel issues from $8,000 to $6,000; travel for 
foreign committee representatives from $65,000 to $40,000; staff travel 
for generic foreign market relations from $70,000 to $40,000; and MAP 
trade activity from $440,000 to $400,000. In all, the committee has 
proposed eliminating or reducing expenses by a total of $353,100.
    Other costs usually split between the reserve pool and 
administrative budgets that would be funded by the administrative 
budget include: Salaries and related employment costs, administration, 
generic marketing efforts, research, compliance activities, and 
industry outreach. These costs remain the same regardless of whether 
there is a reserve pool, as they are necessary to continue 
administration of the program.
    The major expenditures recommended by the committee for the 2010-11 
crop year include salaries and employee-related costs, administration 
costs, compliance activities, research and studies, and costs for 
operation and maintenance of the generic marketing programs.
    The committee recommended $1,745,000 to cover salaries for all 18 
committee employees, vacation accruals, payroll taxes, unemployment 
compensation, retirement contributions, employee benefits, employment 
costs, staff training and travel; insurance, and health insurance. 
Administrative expenses of $925,700 include expenses for rent, 
utilities, postage, office supplies, repairs and maintenance, 
memberships and subscriptions, committee training, consultants, audits, 
equipment leases and depreciation, committee and staff travel, 
committee mileage reimbursements, meeting expenses, bank charges, 
software and programming, and empty raisin bin hauling and maintenance. 
Costs for order compliance activities, not including compliance staff 
salaries, are anticipated to be $90,000; and research and studies, 
especially the cost for the five-year review of its marketing programs 
mandated by the Federal Agricultural Improvement and Reform (FAIR) Act 
of 1996, are anticipated to be $140,000. Costs for industry outreach 
are estimated to be $15,000. Costs for outside counsel approved by USDA 
for personnel issues are estimated to be $6,000. Generic costs for 
market maintenance and travel costs total $1,676,000, and include costs 
for foreign administration of MAP funds, travel for industry 
representatives in foreign countries--not including Mexico or Canada, 
which are considered part of the domestic market--and export consulting 
costs associated with MAP fund administration.

[[Page 4257]]

    The $14.00 per ton assessment rate recommended by the committee was 
derived by dividing the $4,628,960 recommended budget ($4,423,500 
anticipated expenses plus a financial reserve of $205,460) by an 
estimated 330,640 tons of assessable raisins. Sufficient income should 
be generated at the higher assessment rate for the committee to meet 
its anticipated and unanimously-recommended expenses. Due to a 
relatively small crop over which to spread the assessment rate, the 
recommended rate of $14.00 per ton is higher than recent assessment 
rates, and is enough to meet the anticipated expenses and maintain a 
small financial reserve. Pursuant to Sec.  989.81(a) of the order, any 
unexpended assessment funds from the crop year must be credited or 
refunded to the handlers from whom collected.
    The proposed assessment rate would continue in effect indefinitely 
unless modified, suspended, or terminated by USDA upon recommendation 
and information submitted by the committee or other available 
information.
    Although this assessment rate would be in effect for an indefinite 
period, the committee would continue to meet prior to or during each 
crop year to recommend a budget of expenses and consider 
recommendations for modification of the assessment rate. The dates and 
times of committee meetings are available from the committee or USDA. 
Committee meetings are open to the public and interested persons may 
express their views at these meetings. USDA would evaluate committee 
recommendations and other available information to determine whether 
modification of the assessment rate is needed. Further rulemaking would 
be undertaken as necessary. The committee's 2010-11 budget and those 
for subsequent crop years would be reviewed and, as appropriate, 
approved by USDA, in accordance with USDA's program oversight 
responsibilities.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this rule 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 the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 3,000 producers of California raisins and 
approximately 28 handlers subject to regulation under the marketing 
order. The Small Business Administration (13 CFR 121.201) defines small 
agricultural producers as those having annual receipts less than 
$750,000, and defines small agricultural service firms as those whose 
annual receipts are less than $7,000,000.
    Based upon shipment data and other information provided by the 
committee, it may be concluded that a majority of producers and 
approximately 18 handlers of California raisins may be classified as 
small entities.
    This rule would increase the assessment rate established for the 
committee and collected from handlers for the 2010-11 and subsequent 
crop years from $7.50 to $14.00 per ton of assessable raisins acquired 
by handlers. The committee determined that volume regulation was not 
warranted for the 2010-11 crop year because the trade demand calculated 
under the order is currently higher than the crop estimate. Thus, given 
the current balance between supply and demand, the committee 
unanimously determined that volume regulation was not warranted for the 
2010-2011 crop year.
    When volume regulation is in effect, the committee establishes a 
budget allocated between administrative expenses funded by handler 
assessments, and expenses incurred in connection with a reserve pool, 
funded from the sale of reserve pool raisins for free tonnage use. As 
noted earlier, costs which can be associated directly with the reserve 
pool, such as insurance on bins and reserve raisins, can readily be 
allocated to the reserve pool portion of the budget. Other costs, such 
as salaries or administrative expenses, represent expenditures which 
have been jointly allocated between the two portions of the budget, 
because these expenses and staff's time are shared between 
administrative and pool operations.
    When no volume regulation is in effect during a crop year, there is 
no reserve pool budget for that crop year. However, as noted 
previously, the committee continues to incur fixed costs associated 
with salaries and administering the marketing order program, including 
expenses for their part of the MAP grant.
    The committee reviewed and identified the expenses that would be 
reasonable and necessary to continue program operations without a 
reserve pool in effect during the 2010-11 crop year. As illustrated 
earlier, some expenses that are typically split between the 
administrative and reserve pool budgets have been allocated to the 
administrative budget, some expenses were reduced, and some expenses 
have been eliminated.
    Each reserve pool maintains a separate identity from any other 
pools which may be in existence. For example, currently the 2008-09 and 
2009-10 pools are still open, largely due to the lag time between the 
opening of the pool and the receipt of all documents applicable to that 
pool. Under the MIP/IMPF programs, for example, importers have two 
years in which to claim financial incentives from the pools. Thus, 
reserve pools cannot close until at least two years have elapsed.
    The resulting recommended administrative budget includes expenses 
of $4,423,500 and a financial reserve of $205,460, for a total budget 
of $4,628,960 for the 2010-11 crop year. This represents an overall 
decrease from the 2009-10 combined administrative and reserve pool 
budgets, which totaled $5,463,975. The financial reserve provides a 
safety net to cover unexpected expenses and opportunities that present 
themselves during the 2010-2011 crop year.
    The quantity of assessable raisins for 2010-11 crop year is 
estimated to be 330,640 tons. The $14.00 per ton assessment rate 
unanimously recommended by the committee was derived by dividing the 
$4,628,960 anticipated expenses, which includes a financial reserve of 
$205,460, by an estimated 330,640 tons of assessable raisins. 
Sufficient income should be generated at the higher assessment rate for 
the committee to meet its anticipated expenses. Pursuant to Sec.  
989.81(a) of the order, any unexpended assessment funds from the crop 
year must be credited or refunded to the handlers from whom collected.
    Prior to arriving at this budget, the committee considered 
information from various sources, such as the committee's Executive, 
Audit, and Administrative Issues Subcommittees. Alternate spending 
levels were discussed by the Audit Subcommittee, which met on July 22, 
2010, to review the committee's financial condition and consider 
preliminary budgets. The committee was aware that the current raisin 
supply and demand were relatively balanced, and that volume regulations 
might not be warranted for the 2010-11 crop. Therefore, the committee 
developed two alternative budget and assessment rate recommendations to 
accommodate a scenario with volume regulation and

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another scenario without volume regulation. If volume regulation were 
to be implemented, the assessment rate would remain at $7.50 per ton. 
If volume regulation were not to be implemented, some costs typically 
allocated to a reserve pool budget would be absorbed by the 
administrative budget, thus necessitating an increased assessment rate 
to $14.00 per ton. The committee unanimously approved these alternative 
budget and assessment recommendations on July 22, 2010.
    The committee met again on October 5, 2010, and determined that 
volume regulation was not warranted for the 2010-11 season. This 
triggered recommendation of the committee's proposal for an 
administrative budget of $4,628,960 and an assessment rate of $14.00 
per ton, since the current assessment rate of $7.50 would not provide 
enough funds to cover anticipated expenses of $4,423,500.
    A review of statistical data on the California raisin industry 
indicates that assessment revenue has consistently been less than one 
percent of grower revenue in recent years. A minimum grower price of 
$1,500 per ton of raisins for the 2010-11 crop year has been announced 
by the Raisin Bargaining Association. If this price is realized, 
assessment revenue would continue to represent less than one percent of 
grower revenue in the 2010-11 crop year, even with the increased 
assessment rate.
    Regarding the impact of this action on affected entities, this 
action would increase the assessment obligation imposed on handlers. 
While increased assessments impose additional costs on handlers 
regulated under the order, the rates are uniform on all handlers, and 
proportional to the size of their businesses. However, these costs 
would be offset by the benefits derived by the operation of the 
marketing order.
    In addition, the Audit Subcommittee and the full committee's 
meetings were widely publicized throughout the California raisin 
industry and all interested persons were invited to attend the meetings 
and encouraged to participate in committee deliberations on all issues. 
Like all subcommittee and committee meetings, the July 22 and October 
5, 2010, meetings were public meetings, and all entities, both large 
and small, were able to express views on this issue, if they chose to 
do so. Based upon the discussions and the unanimous vote by the 
committee, the increased assessment is reasonable and necessary to 
maintain the program. Finally, interested persons are invited to submit 
comments on this proposed rule, including the regulatory and 
informational impacts of this action on small businesses.
    This proposed rule would impose no additional reporting or 
recordkeeping requirements on either small or large California raisin 
handlers. As with all Federal marketing order programs, reports and 
forms are periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    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.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this rule.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions 
about the compliance guide should be sent to Antoinette Carter at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    A 10-day comment period is provided to allow interested persons to 
respond to this proposed rule. Ten days is deemed appropriate because: 
(1) The 2010-11 crop year began on August 1, 2010, and the order 
requires the rate of assessments for each crop year to apply to all 
assessable raisins handled during the crop year; (2) the committee 
needs to have sufficient funds to pay its expenses, which are incurred 
on a continuous basis, and (3) handlers are aware of this action, which 
was unanimously recommended by the committee at a public meeting.

List of Subjects in 7 CFR Part 989

    Grapes, Marketing agreements, Raisins, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 989 is 
proposed to be amended as follows:

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 989 continues to read as 
follows:

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

    2. Section 989.347 is revised to read as follows:

Sec.  989.347  Assessment rate.

    On and after August 1, 2010, an assessment rate of $14.00 per ton 
is established for assessable raisins produced from grapes grown in 
California.

    Dated: January 19, 2011.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. 2011-1427 Filed 1-24-11; 8:45 am]
BILLING CODE 3410-02-P
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