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###### Department of Agriculture

###### Agricultural Marketing Service

          - 7 CFR Parts 1005 and 1007
          - [Doc. Nos. AMS-DA-07-0133; AO-388-A15; AO-366-A44; DA-03-11-B]

# AGENCY:

Agricultural Marketing Service, USDA.

# ACTION:

Termination of proceeding.

# SUMMARY:

This action terminates a rulemaking proceeding on two proposed amendments that sought to amend the producer-handler provisions of the Appalachian and Southeast milk marketing orders. Other proposed amendments considered as part of the rulemaking proceeding were addressed in previously issued decisions.

# FOR FURTHER INFORMATION CONTACT:

                        Gino M. Tosi, Order Formulation and Enforcement, USDA/AMS/Dairy Programs, STOP 0231-Room 2971, 1400 Independence Avenue, SW., Washington, DC 20250-0231, (202) 690-1366, e-mail address:                         *gino.tosi@ams.usda.gov*, mail to:                         *gino.tosi@usda.gov*.                    

# SUPPLEMENTARY INFORMATION:

This administrative action is governed by the provisions of Sections 556 and 557 of Title 5 of the United States Code and, therefore, is excluded from the requirements of Executive Order 12866.

This action terminates the rulemaking proceeding concerning proposed amendments to the producer-handler provisions of the Appalachian and Southeast orders. The proposals were considered at a public hearing held February 23-26, 2004. Other proposed amendments considered at the public hearing were addressed in a partial recommended decision issued May 13, 2005, and published May 20, 2005 (70 FR 29410), and a partial final decision issued September 15, 2005, and published September 21, 2005 (70 FR 55458). A partial final rule was published October 12, 2005 (70 FR 59221), making the amendments adopted in these decisions effective November 1, 2005.

## Regulatory Flexibility Act and Paperwork Reduction Act

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601-612), the Agricultural Marketing Service has considered the economic impact of this action on small entities and has certified that this rule will not have a significant economic impact on a substantial number of small entities. For the purpose of the Regulatory Flexibility Act, a dairy farm is considered a small business if it has an annual gross revenue of less than $750,000, and a dairy products manufacturer is a small business if it has fewer than 500 employees.

For the purposes of determining which dairy farms are small businesses, the $750,000 per year criterion was used to establish a production guideline of 500,000 pounds per month. Although this guideline does not factor in additional monies that may be received by dairy producers, it should be an inclusive standard for most small dairy farmers. For purposes of determining a handler's size, if the plant is part of a larger company operating multiple plants that collectively exceed the 500-employee limit, the plant will be considered a large business even if the local plant has fewer than 500 employees.

Producer-handlers are defined as dairy farmers that process only their own milk production. These entities must be dairy farmers as a pre-condition to operating processing plants as producer-handlers. The size of the dairy farm determines the production level of the operation and is the controlling factor in the capacity of the processing plant and possible sales volume associated with the producer-handler entity. Determining whether a producer-handler is considered a small or large business must depend on its capacity as a dairy farm where a producer-handler with annual gross revenue in excess of $750,000 is considered a large business.

During February 2004, the month the hearing was held, the milk of 7,311 dairy farmers was pooled on the Appalachian (Order 5) and Southeast (Order 7) milk orders (3,395 Order 5 dairy farmers and 3,916 Order 7 dairy farmers). Of the total, 3,252 dairy farmers (or 96 percent) and 3,764 dairy farmers (or 96 percent) were considered small businesses on the Appalachian and Southeast orders, respectively.

During February 2004, there were a total of 36 plants associated with the Appalachian order (25 fully regulated plants, 7 partially regulated plants, 1 producer-handler, and 3 exempt plants) and a total of 51 plants associated with the Southeast order (32 fully regulated plants, 6 partially regulated plants, and 13 exempt plants). The number of plants meeting the small business criteria under the Appalachian and Southeast orders were 13 (or 36 percent) and 13 (or 25 percent), respectively.

Two proposals that would amend the producer-handler provisions of the Appalachian and Southeast orders were considered at the public hearing. A proposal published in the hearing notice as Proposal 7 sought to apply the pooling and pricing provisions of the Southeast or Appalachian orders to producer-handlers with more than 3 million pounds of fluid route disposition during the month. A dairy farmer who is a producer-handler with fluid route disposition above the proposed 3-million pounds per month threshold would be considered a “large” business.

A second proposal published in the hearing notice as Proposal 8 sought to allow producer-handlers to purchase a limited amount of supplemental milk without losing their status as producer-handlers. As proposed, a producer-handler would be allowed to purchase up to 10 percent of the producer's monthly milk production during the months of December through May, and 30 percent during the months of June through November from other sources.

Because this action terminates the rulemaking proceeding without amending the existing rules applicable to producer-handlers in the Appalachian and Southeast orders, the economic conditions of small entities remain unchanged. This action does not change reporting, record keeping, or other compliance requirements.

*Prior documents in this proceeding:*

*Notice of Hearing:*                     Issued January 16, 2004; published January 23, 2004 (69 FR 3278).                

*Partial Recommended Decision:*                     Issued May 13, 2005; published May 20, 2005 (70 FR 29410).                          ( print page 10843)    

*Partial Final Decision:*                     Issued September 15, 2005; published September 21, 2005 (70 FR 55458).                

*Partial Final Rule:*                     Issued October 7, 2005; published October 12, 2005 (70 FR 59221).                

## Preliminary Statement

                    A public hearing was held upon proposed amendments to the marketing agreements and orders regulating the handling of milk in the Appalachian and Southeast marketing areas. The hearing was held, pursuant to the provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), and the applicable rules of practice and procedure governing the formulation of marketing agreements and marketing orders (7 CFR part 900), at Atlanta, Georgia, on February 23-26, 2004, pursuant to a notice of hearing issued January 16, 2004, and published in the                     **Federal Register**                     on January 20, 2004 (69 FR 3278).                

## Producer-Handler Provisions

This action terminates the rulemaking proceeding concerning proposed amendments to the producer-handler provisions of the Appalachian and Southeast orders. A proposal published in the hearing notice as Proposal 7 sought to apply the Appalachian and Southeast orders' pooling and pricing provisions to producer-handlers with fluid route disposition in excess of 3 million pounds per month. A second proposal, published in the hearing notice as Proposal 8, sought to allow producer-handlers to purchase up to 10 percent of the producer's monthly milk production during December through May and 30 percent during June through November from other sources.

The Appalachian and the Southeast milk orders provide identical definitions that describe and define a category of handlers known as producer-handlers. Both orders require producer-handlers to operate their businesses at their own enterprise and risk, meaning that the care and management of the dairy animals and other resources necessary for the production, processing, and distribution of fluid milk products are the sole responsibility of the handler.

The Appalachian and Southeast orders prohibit producer-handlers from purchasing any amount of supplemental milk from pool sources or from any other source. Producer-handlers bear the entire burden of balancing their own milk production. Any fluctuation in a producer-handler's daily and seasonal milk needs must be met through their own farm production and any excess milk supplies must be disposed of at their own expense.

Producer-handlers are exempt from the pooling and pricing provisions of the Appalachian and Southeast orders. Exemption from the pooling and pricing provisions of the orders means that the minimum class prices established under the orders that handlers must pay for milk are not applicable to producer-handlers, and producer-handlers receive no minimum price protection for their milk production not disposed of for fluid uses.

While producer-handlers are exempt from the pooling and pricing provisions of the Appalachian and Southeast orders, they are required to submit reports to the Market Administrator who monitors producer-handler operations to ensure that they are in compliance with the conditions for such exemption status.

                    The Secretary is in the process of receiving proposals to initiate a new rulemaking proceeding to consider the elimination of the producer-handler provision in all Federal milk marketing orders. Two such proposals have been received and the Secretary has invited the submission of additional proposals. Such proposals must be received by Dairy Programs by March 16, 2009. (                    *See*                     Dairy Programs Web site at                     *http://www.ams.usda.gov/​dairy*.)                

Given this development and the substance of the two proposals considered herein, the review of the producer-handler exemption under all Federal milk marketing orders would be a more comprehensive review. Therefore, the Secretary has determined that this rulemaking proceeding should be terminated.

## Termination of Proceeding

In view of the foregoing, it is hereby determined that the proceeding with respect to proposed amendments to the Appalachian and Southeast orders regarding the regulation of producer-handlers should be and is hereby terminated.

# List of Subjects in 7 CFR Parts 1005 and 1007

      - Milk marketing orders

The authority citation for 7 CFR Parts 1005 and 1007 continues to read as follows:

Authority:7 U.S.C. 601-674, and 7253.

Dated: March 9, 2009.

Robert C. Keeney,

Acting Associate Administrator.

[FR Doc. E9-5414 Filed 3-12-09; 8:45 am]

BILLING CODE 3410-02-P