[Federal Register Volume 70, Number 196 (Wednesday, October 12, 2005)]
[Rules and Regulations]
[Pages 59221-59224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-20525]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1005 and 1007

[Docket No. AO-388-A15 and AO-366-A44; DA-03-11]


Milk in the Appalachian and Southeast Marketing Areas; Order 
Amending the Orders

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This partial final rule amends the Appalachian and Southeast 
marketing orders. Specifically, the final rule expands the Appalachian 
milk marketing area, eliminates the ability to simultaneously pool the 
same milk on the Appalachian or Southeast order and on a State-operated 
milk order that has marketwide pooling, and amends the transportation 
credit provisions of the Southeast and Appalachian orders. The 
amendments are based on record evidence of a public hearing held 
February 2004. More than the required number of dairy farmers approved 
the issuance of the amended orders.

EFFECTIVE DATE: November 1, 2005.

FOR FURTHER INFORMATION CONTACT: Antoinette M. Carter, Marketing 
Specialist, USDA/AMS/Dairy Programs, Order Formulation and Enforcement, 
STOP 0231--Room 2971, 1400 Independence Avenue, SW., Washington, DC 
20250-0231, (202) 690-3465, e-mail address: <a href="/cdn-cgi/l/email-protection#55343b213a3c3b302121307b36342721302715202631347b323a23"><span class="__cf_email__" data-cfemail="a5c4cbd1cacccbc0d1d1c08bc6c4d7d1c0d7e5d0d6c1c48bc2cad3">[email protected]</span></a>.

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 final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have a retroactive 
effect. This rule will not preempt any state or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with the rule.
    The Agricultural Marketing Agreement Act of 1937, as amended, (7 
U.S.C. 601-674) 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 request 
modification or exemption from such order by filing with the Department 
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 the law. A handler is afforded the opportunity for a hearing on 
the petition. After a hearing, the Department 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 its 
principal place of business, has jurisdiction in equity to review the 
Department's ruling on the petition, provided a bill in equity is filed 
not later than 20 days after the date of the entry of the ruling.

Regulatory Flexibility Act and Paperwork Reduction Act

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.), 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.
    During February 2004, the month in which 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.
    The final rule will expand the Appalachian milk marketing area to 
include 25 unregulated counties and 15 unregulated cities in the State 
of Virginia that currently are not in any Federal milk marketing area. 
Adopted amendments to the producer milk provisions of the Appalachian 
and Southeast milk orders will prevent producers who share in the 
proceeds of a state marketwide pool from simultaneously sharing in the 
proceeds of a Federal marketwide pool on the same milk. In addition, 
this final rule amends the transportation credit provisions of the 
Appalachian and Southeast orders.
    The final rule amendments that will expand the Appalachian 
marketing area will likely continue to regulate under the Appalachian 
order two fluid milk distributing plants located in Roanoke, Virginia, 
and Lynchburg, Virginia, and shift the regulation of a distributing 
plant located in Mount Crawford, Virginia, from the Northeast order to 
the Appalachian order.
    The amendments will allow the Kroger Company's (Kroger) Westover 
Dairy plant, located in Lynchburg, Virginia, that competes for a milk 
supply with other Appalachian order plants to continue to be regulated 
under the order if it meets the order's minimum performance standards. 
The plant has been regulated by the Appalachian order since January 
2000. In addition, the adopted amendments will remove the disruption 
that occurs as a result of the Dean Foods Company's (Dean Foods) 
Morningstar Foods plant, located in Mount Crawford, Virginia, shifting 
its regulatory status under the Northeast order.
    The Appalachian order currently contains a ``lock-in'' provision 
that provides that a plant located within the marketing area that meets 
the order's minimum performance standard will be regulated by the 
Appalachian order even if the majority of the plant's Class I route 
sales are in another marketing area. The expansion of the Appalachian 
marketing area along with the lock-in provision will regulate fluid 
milk distributing plants physically located in the marketing area that 
meet the order's minimum performance standard even if

[[Page 59222]]

the majority of their sales are in another Federal order marketing 
area. Accordingly, the amendments will regulate three distributing 
plants under the Appalachian order: Kroger's Westover Dairy, located in 
Lynchburg, Virginia; Dean Foods' Morningstar Foods plant, located in 
Mount Crawford, Virginia; and National Dairy Holdings' Valley Rich 
Dairy, located in Roanoke, Virginia. Based on Small Business 
Administration criteria these are all large businesses.
    This final rule contains amendments to the transportation credit 
provisions of the Appalachian and Southeast orders. The Appalachian and 
Southeast orders contain provisions for a transportation credit 
balancing fund from which payments are made to handlers to partially 
offset the cost of moving bulk milk into each marketing area to meet 
fluid milk demands.
    The amendments included in this final rule will increase the 
maximum rate of the transportation credit assessment of the Appalachian 
and Southeast orders by 3 cents per hundredweight. Specifically, the 
amendments will increase the maximum rate of assessment for the 
Appalachian order from 6.5 cents per hundredweight to 9.5 cents per 
hundredweight while increasing the maximum rate of assessment for the 
Southeast order from 7 cents per hundredweight to 10 cents per 
hundredweight. Increasing the transportation assessment rates will tend 
to minimize the exhaustion of the transportation credit balancing fund 
when there is a need to import supplemental milk from outside the 
marketing areas to meet Class I needs.
    Currently, the Appalachian and Southeast orders provide that 
transportation credits shall apply to the milk of a dairy farmer who 
was not a ``producer'' under the order during more than two of the 
immediately preceding months of February through May but not more than 
50 percent of the milk production of the dairy farmer, in aggregate, 
was received as producer milk under the order during those two months. 
The adopted amendments contained in this final rule will provide the 
Market Administrator of the Appalachian order and the Market 
Administrator of the Southeast order the discretionary authority to 
adjust the 50 percent milk production standard.
    This final rule will prohibit the simultaneous pooling of the same 
milk on the Appalachian or Southeast milk marketing orders and on a 
State-operated order that provides for the marketwide pooling of milk. 
Since the 1960's, the Federal milk order program has recognized the 
harm and disorder that result to both producers and handlers when the 
same milk of a producer is simultaneously pooled on more than one 
Federal order. When this occurs, producers do not receive uniform 
minimum prices, and handlers receive unwarranted competitive 
advantages.
    The need to prevent ``double pooling'' became critically important 
as distribution areas expanded, orders merged, and a national pricing 
surface was adopted. Milk already pooled under a State-operated program 
and able to simultaneously be pooled under a Federal order has 
essentially the same undesirable outcomes that Federal orders once 
experienced and subsequently corrected. Thus, amendments to eliminate 
the ``double pooling'' of the same milk on the Appalachian or Southeast 
order and a State-operated milk order that has marketwide pooling are 
included in this final rule.
    The amendments contained in this final rule will be applied to all 
Appalachian and Southeast order participants (producers and handlers), 
which consist of both large and small business. Since the adopted 
amendments in this final rule will be subject to all the orders' 
producers and handlers regardless of their size, the provisions are not 
expected to provide a competitive advantage to any participant. 
Accordingly, the amendments will not have a significant economic impact 
on a substantial number of small entities.
    A review of reporting requirements was completed under the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). It was 
determined that these adopted amendments will have no impact on 
reporting, recordkeeping, or other compliance requirements because they 
will remain identical to the current requirements. No new forms are 
proposed and no additional reporting requirements will be necessary.
    This action does not require additional information collection that 
requires clearance by the Office of Management and Budget (OMB) beyond 
currently approved information collection. The primary sources of data 
used to complete the forms are routinely used in most business 
transactions. Forms require only a minimal amount of information which 
can be supplied without data processing equipment or a trained 
statistical staff. Thus, the information collection and reporting 
burden is relatively small. Requiring the same reports for all handlers 
does not significantly disadvantage any handler that is smaller than 
the industry average.
    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).
    Partial Final Decision: Issued September 15, 2005; published 
September 21, 2005 (70 FR 55458).

Findings and Determinations

    The following findings and determinations hereinafter set forth 
supplement those that were made when the Appalachian and Southeast 
orders were first issued and when they were amended. The previous 
findings and determinations are hereby ratified and confirmed, except 
where they may conflict with those set forth herein.
    The following findings are hereby made with respect to each of the 
aforesaid orders:
    (a) Findings upon the basis of the hearing record. 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), a public hearing was held upon 
certain proposed amendments to the tentative marketing agreements and 
to the orders regulating the handling of milk in the specified 
marketing areas.
    Upon the basis of the evidence introduced at such hearing and the 
record thereof, it is found that:
    (1) The said orders as hereby amended, and all of the terms and 
conditions thereof, will tend to effectuate the declared policy of the 
Act;
    (2) The parity prices of milk, as determined pursuant to section 2 
of the Act, are not reasonable in view of the price of feeds, available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk in the aforesaid marketing areas. The 
minimum prices specified in the orders as hereby amended are such 
prices as will reflect the aforesaid factors, insure a sufficient 
quantity of pure and wholesome milk, and be in the public interest; and
    (3) The said orders as hereby amended regulates the handling of 
milk in the same manner as, and is applicable only to persons in the 
respective classes of industrial or commercial activity specified in, 
marketing agreements upon which a hearing has been held.
    (4) All milk and milk products handled by handlers, as defined in 
the order as hereby amended, are in the

[[Page 59223]]

current of interstate commerce or directly burden, obstruct, or affect 
interstate commerce in milk or its products.
    (b) Additional Findings. It is necessary and in the public interest 
to make these amendments to the Appalachian and Southeast orders 
effective November 1, 2005. This effective date will ensure the timely 
implementation of the amendments. Any delay beyond that date would tend 
to disrupt the orderly marketing of milk in the aforesaid marketing 
areas.
    The amendments to these orders are known to handlers. The partial 
final decision containing the proposed amendments to these orders was 
issued on September 15, 2005.
    The changes that result from these amendments will not require 
extensive preparation or substantial alteration in the method of 
operation for handlers. In view of the foregoing, it is hereby found 
and determined that good cause exists for making theses amendments 
effective November 1, 2005. It would be contrary to the public interest 
to delay the effective date of these amendments for 30 days after their 
publication in the Federal Register. (Sec. 553(d), Administrative 
Procedure Act, 5 U.S.C 551-559.)
    (c) Determinations. It is hereby determined that:
    (1) The refusal or failure of handlers (excluding cooperative 
associations specified in Sec. 8c(9) of the Act) of more than 50 
percent of the milk that is marketed within the specified marketing 
areas to sign a proposed marketing agreement tends to prevent the 
effectuation of the declared policy of the Act;
    (2) The issuance of this order amending the Appalachian and 
Southeast orders are the only practical means pursuant to the declared 
policy of the Act of advancing the interests of producers as defined in 
the orders as hereby amended;
    (3) The issuance of the order amending the Appalachian and 
Southeast orders is favored by at least two-thirds of the producers who 
were engaged in the production of milk for sale in each of the 
marketing areas.

List of Subjects in 7 CFR Parts 1005 and 1007

    Milk marketing orders.

Order Relative to Handling

0
It is therefore ordered, that on and after the effective date hereof, 
the handling of milk in the Appalachian and Southeast marketing areas 
shall be in conformity to and in compliance with the terms and 
conditions of the orders, as mended, and as hereby further amended, as 
follows:

PART 1005--MILK IN THE APPALACHIAN MARKETING AREA

0
1. The authority citation for 7 CFR part 1005 continues to read as 
follows:

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

0
2. Section 1005.2 is amended by revising the Virginia counties and 
cities to read as follows:


Sec.  1005.2  Appalachian marketing area.

* * * * *

Virginia Counties and Cities

    Alleghany, Amherst, Augusta, Bath, Bedford, Bland, Botetourt, 
Buchanan, Campbell, Carroll, Craig, Dickenson, Floyd, Franklin, Giles, 
Grayson, Henry, Highland, Lee, Montgomery, Patrick, Pittsylvania, 
Pulaski, Roanoke, Rockbridge, Rockingham, Russell, Scott, Smyth, 
Tazewell, Washington, Wise, and Wythe; and the cities of Bedford, 
Bristol, Buena Vista, Clifton Forge, Covington, Danville, Galax, 
Harrisonburg, Lexington, Lynchburg, Martinsville, Norton, Radford, 
Roanoke, Salem, Staunton, and Waynesboro.
* * * * *

0
3. Section 1005.13 is amended by revising the introductory text and 
adding a new paragraph (e) to read as follows:


Sec.  1005.13  Producer milk.

    Except as provided for in paragraph (e) of this section, Producer 
milk means the skim milk (or the skim equivalent of components of skim 
milk) and butterfat contained in milk of a producer that is:
* * * * *
    (e) Producer milk shall not include milk of a producer that is 
subject to inclusion and participation in a marketwide equalization 
pool under a milk classification and pricing program imposed under the 
authority of a State government maintaining marketwide pooling of 
returns.


Sec.  1005.81  [Amended]

0
4. In Sec.  1005.81(a), remove ``$0.065'' and add, in its place, 
``$0.095''.


Sec.  1005.82  [Amended]

0
5. In Sec.  1005.82, paragraph (b) is amended by removing the words 
``Director of the Dairy Division'' and adding, in their place, the 
words ``Deputy Administrator of Dairy Programs'' and adding a new 
paragraph (c)(2)(iv) to read as follows:


Sec.  1005.82  Payments from the transportation credit balancing fund.

* * * * *
    (c) * * *
    (2) * * *
    (iv) The market administrator may increase or decrease the milk 
production standard specified in paragraph (c)(2)(ii) of this section 
if the market administrator finds that such revision is necessary to 
assure orderly marketing and efficient handling of milk in the 
marketing area. Before making such a finding, the market administrator 
shall investigate the need for the revision either on the market 
administrator's own initiative or at the request of interested persons. 
If the investigation shows that a revision might be appropriate, the 
market administrator shall issue a notice stating that the revision is 
being considered and inviting written data, views, and arguments. Any 
decision to revise an applicable percentage must be issued in writing 
at least one day before the effective date.
* * * * *

PART 1007--MILK IN THE SOUTHEAST MARKETING AREA

0
6. The authority citation for 7 CFR part 1007 continues to read as 
follows:

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


0
7. Section 1007.13 is amended by revising the introductory text and 
adding a new paragraph (e) to read as follows:


Sec.  1007.13  Producer milk.

    Except as provided for in paragraph (e) of this section, Producer 
milk means the skim milk (or the skim equivalent of components of skim 
milk) and butterfat contained in milk of a producer that is:
* * * * *
    (e) Producer milk shall not include milk of a producer that is 
subject to inclusion and participation in a marketwide equalization 
pool under a milk classification and pricing program imposed under the 
authority of a State government maintaining marketwide pooling of 
returns.


Sec.  1007.81  [Amended]

0
8. In Sec.  1007.81(a), remove ``$0.07'' and add, in its place, 
``$0.10''.


Sec.  1007.82  [Amended]

0
9. In Sec.  1007.82, paragraph (b) is amended by removing the words 
``Director of the Dairy Division'' and adding, in their place, the 
words ``Deputy Administrator of Dairy Programs'' and adding a new 
paragraph (c)(2)(iv) to read as follows:


Sec.  1007.82  Payments from the transportation credit balancing fund.

* * * * *

[[Page 59224]]

    (c) * * *
    (2) * * *
    (iv) The market administrator may increase or decrease the milk 
production standard specified in paragraph (c)(2)(ii) of this section 
if the market administrator finds that such revision is necessary to 
assure orderly marketing and efficient handling of milk in the 
marketing area. Before making such a finding, the market administrator 
shall investigate the need for the revision either on the market 
administrator's own initiative or at the request of interested persons. 
If the investigation shows that a revision might be appropriate, the 
market administrator shall issue a notice stating that the revision is 
being considered and inviting written data, views, and arguments. Any 
decision to revise an applicable percentage must be issued in writing 
at least one day before the effective date.
* * * * *

    Dated: October 7, 2005.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 05-20525 Filed 10-7-05; 12:57 pm]
BILLING CODE 3410-02-P


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