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.

Proposed Rules Federal Register

33534 

Vol. 75, No. 113 

Monday, June 14, 2010 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 1000 

[Doc. No. AMS–DA–09–0062; AO–14–A73, et 

al.; DA–03–10] 

Milk in the Northeast and Other 

Marketing Areas; Final Decision on 

Proposed Amendments to Marketing 

Agreements and Orders 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Proposed rule. 

SUMMARY: This final decision maintains 

the current fluid milk product 

definition’s compositional standard of 

6.5 percent nonfat milk solids criterion 

and incorporates an equivalent 2.25 

percent true milk protein criterion for 

determining if a product meets the 

compositional standard. The decision 

also determines how milk and milkderived ingredients should be priced 

under all Federal milk marketing orders 

when used in products meeting the 

fluid milk product definition. The 

decision provides exemptions for 

drinkable yogurt products containing at 

least 20 percent yogurt (by weight), 

kefir, and products intended to be meal 

replacements from the fluid milk 

product definition. The orders as 

amended are subject to producer 

approval by referendum before they can 

be implemented. 

FOR FURTHER INFORMATION CONTACT: 

Henry H. Schaefer, Economist, USDA/ 

AMS/Dairy Programs, Upper Midwest 

Milk Market Administrators Office, 

Suite 200, 1600 West 82nd Street, 

Minneapolis, Minnesota 55431–1420, 

(952) 831–5292, e-mail address: 

hschaefer@fmma30.com; or William 

Francis, Associate Deputy 

Administrator, USDA/AMS/Dairy 

Programs, Order Formulation and 

Enforcement, Stop 0231–Room 2971–S, 

1400 Independence Avenue, SW., 

Washington, DC 20250–0231, (202) 720– 

6274, e-mail address: 

william.francis@ams.usda.gov. 

SUPPLEMENTARY INFORMATION: This final 

decision maintains the current fluid 

milk product definition’s compositional 

standard of 6.5 percent nonfat milk 

solids and incorporates an equivalent 

2.25 percent true milk protein criterion 

for determining if a product meets the 

compositional standard. The decision 

also determines how milk and milkderived ingredients should be priced 

under all Federal milk marketing orders 

when used in products meeting the 

fluid milk product definition. The 

decision exempts drinkable yogurt 

products containing at least 20 percent 

yogurt (by weight), kefir, infant 

formulas, dietary products (meal 

replacements) and other products that 

may contain milk-derived ingredients 

from the fluid milk product definition. 

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. 

The proposed amendments to the rules 

herein have been reviewed under 

Executive Order 12988, Civil Justice 

Reform. They are not intended to have 

a retroactive effect. The Agricultural 

Marketing Agreement Act of 1937 (Act), 

as amended (7 U.S.C. 604–674), 

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 a 

habitant, or has its principal place of 

business, has jurisdiction in equity to 

review the USDA’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 proposed 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. 

For the month of June 2005, the 

month the hearing was held, 52,425 

dairy farmers were pooled on the 

Federal order system. Of the total, 

49,160, or 94 percent were considered 

small businesses. During the same 

month, 1,530 plants were regulated by 

or reported their milk receipts to their 

respective Market Administrator. Of the 

total, 847, or 55 percent were 

considered small businesses. 

The fluid milk product definition sets 

out the criteria for determining if the 

use of producer milk and milk-derived 

ingredients in such products should be 

priced at the Class I price. The 

established criteria for the classification 

of producer milk are applied in an 

identical fashion to both large and small 

businesses and will not have any 

different impact on those businesses 

producing fluid milk products thus 

assuring that similarly situated handlers 

have the same minimum price as 

required by Section 608(c)5 of the Act. 

Therefore, the amendments will not 

have a significant economic impact on 

a substantial number of small entities. 

The impact of the proposed 

amendments on large and small entities 

would be negligible. In fact, the 

amendment proposing to change the 


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classification of kefir and drinkable 

yogurt is estimated to affect blend prices 

by no more than $ 0.0026 per cwt based 

on record evidence. 

The Agricultural Marketing Service is 

committed to complying with the EGovernment 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. 

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 amendments would have no 

impact on reporting, recordkeeping, or 

other compliance requirements because 

they would remain identical to the 

current requirements. No new forms are 

proposed and no additional reporting 

requirements are necessary. 

This notice does not require 

additional information collection that 

needs 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. The 

forms require only a minimal amount of 

information that 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 April 6, 

2005; published April 12, 2005 (70 FR 

19012). 

Recommended Decision: Issued May 

12, 2006; published May 17, 2006 (71 

FR 28590). 

Preliminary Statement 

Notice is hereby given of the filing 

with the Hearing Clerk of this final 

decision with respect to the proposed 

amendments to the marketing 

agreements and the orders regulating the 

handling of milk in the Northeast and 

other marketing areas. This notice is 

issued pursuant to the provisions of the 

Agricultural Marketing Agreement Act 

and 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 

proposed amendments to the marketing 

agreements and the orders regulating the 

handling of milk in all Federal milk 

marketing areas. The hearing was held 

pursuant to the provisions of the 

Agricultural Marketing Agreement Act 

of 1937 (AMAA), 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). 

The proposed amendments set forth 

below are based on the record of a 

public hearing held in Pittsburgh, 

Pennsylvania, on June 20–23, 2005, 

pursuant to a notice of hearing issued 

April 6, 2005 and published April 12, 

2005 (70 FR 19012); and a 

recommended decision issued May 12, 

2006 and published May 17, 2006 (71 

FR 28590). 

The material issues on the record of 

the hearing relate to: 

1. Amending the fluid milk product 

definition. 

Findings and Conclusions 

This final decision maintains the 

current fluid milk product definition’s 

compositional standard of 6.5 percent 

nonfat milk solids and incorporates an 

equivalent 2.25 percent true milk 

protein criterion for determining 

whether a product meets the 

compositional standard. The decision 

also determines how milk and milkderived ingredients should be priced 

under all orders when used in products 

meeting the fluid milk product 

definition. The decision exempts 

drinkable yogurt products containing at 

least 20 percent yogurt (by weight), 

kefir, infant formulas, dietary products 

(meal replacements) and other products 

that may contain milk-derived 

ingredients from the fluid milk product 

definition. 

All Federal milk orders currently state 

that ‘‘fluid milk product means any milk 

products in fluid or frozen form 

containing less than 9 percent butterfat 

that are intended to be used as 

beverages.’’ The fluid milk product 

definition also contains a non-definitive 

list of dairy products that are named 

fluid milk products. In addition to the 

compositional butterfat standard fluid 

milk products shall not include, among 

other products, ‘‘* * * any product that 

contains by weight less than 6.5 percent 

nonfat milk solids * * *’’ Dairy 

products that do not fall within these 

limits are not considered fluid milk 

products and the milk used to produce 

these products is classified in Class II, 

Class III or Class IV, depending on the 

form or purpose for which the products 

are to be used. 

Eleven proposals were published in 

the hearing notice for this proceeding. 

Proposals 1, 3, 4 and 6 were abandoned 

at the hearing by their proponents in 

support of other noticed proposals. No 

further reference to these proposals will 

be made. 

A proposal published in the hearing 

notice as Proposal 2, offered by Dairy 

Farmers of America, Inc. (DFA), seeks to 

amend the fluid milk product definition 

to include any dairy ingredient, 

including whey, when calculating the 

milk contained in a product on a 

protein-equivalent or nonfat solids 

equivalent basis. DFA is a dairy farmermember owned cooperative and at the 

time of the hearing had 12,800 member 

farms located in 49 states whose 

members’ milk is pooled throughout the 

Federal order system. 

H.P. Hood LLC (H.P. Hood) owns and 

operates milk processing and 

manufacturing plants in the Eastern and 

Midwest United States and is the 

proponent of a proposal published in 

the hearing notice as Proposal 5 that 

was modified at the hearing. As 

modified, Proposal 5 seeks to amend the 

fluid milk product definition to include 

any product that, based upon 

substantial evidence as determined by 

the Department, directly competes with 

other fluid milk products and that the 

Department must make a written 

determination before any product can be 

classified as a fluid milk product. 

A proposal published in the hearing 

notice as Proposal 7 was offered by the 

National Milk Producers Federation 

(NMPF). At the time of the hearing 

NMPF consisted of 33 dairy-farmer 

member cooperatives that represented 

more than 75 percent of U.S. dairy 

farmers. Proposal 7 seeks to amend the 

fluid milk product definition by 

removing the reference ‘‘6.5 percent 

nonfat solids standard and whey,’’ and 

adopting a 2.25 percent true milk 

protein criterion. During the hearing, 

DFA offered a modification to Proposal 

7 by seeking to authorize the 

Department to make an interim 

classification determination for new 

products that result from new 

technology. The Department would then 

convene a hearing to address the use of 

the new technology in classification 

decisions and make a final classification 

determination for the new product 

within one year. 

Proposal 8 seeks to amend the fluid 

milk product definition by excluding 

yogurt-containing beverages from the 

fluid milk product definition. This 

proposal was offered by The Dannon 

Company, Inc. (Dannon), a wholly 

owned subsidiary of The Danone Group 

that produces yogurt and fresh dairy 

products in 40 countries, including the 

United States. 

Proposal 9 also seeks to amend the 

fluid milk product definition by 

excluding drinkable food products with 


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no more than 2.2 percent skim milk 

protein provided the product contains at 

least 20 percent yogurt (nonfat yogurt, 

lowfat yogurt or yogurt) by weight from 

the fluid milk product definition. 

Proposal 9 was offered by General Mills, 

Inc. (General Mills), a food 

manufacturer that markets such 

products as Yoplait yogurt and yogurtcontaining products in over 100 

countries, including the United States. 

A proposal published in the hearing 

notice as Proposal 10 was offered by the 

Novartis Nutrition Corporation 

(Novartis). Novartis develops and 

manufactures a variety of products, 

including milk-based products, 

designed to meet specific nutritional 

needs. Proposal 10 seeks to amend the 

fluid milk product definition by 

excluding formulas prepared for dietary 

use by removing the words ‘‘(meal 

replacement) that are packaged in 

hermetically-sealed containers.’’ The 

proposal would remove the 6.5 percent 

nonfat milk solids standard. 

A proposal published in the hearing 

notice as Proposal 11 seeks to amend 

the fluid milk product definition by 

excluding health care beverages 

distributed to the health care industry. 

Proposal 11 was offered by Hormel 

Foods, LLC (Hormel), a wholly owned 

subsidiary of Hormel Foods Corporation 

and manufacturer of a variety of food 

products primarily for the health care 

industry. 

A witness appearing on behalf of 

NMPF testified in support of Proposal 7. 

The witness testified that Proposal 7 

would close loopholes in the current 

fluid milk product definition that have 

allowed products developed as a result 

of new technology to avoid 

classification as fluid milk products. 

The witness said that the 6.5 percent 

nonfat solids standard should be 

eliminated and replaced with a 2.25 

percent protein standard that would 

also include whey proteins in 

determining if the product meets the 

protein standard. The witness stressed 

that whey proteins should be 

specifically defined as whey proteins 

that are a by-product of the cheese 

making process. The witness was of the 

opinion that adoption of Proposal 7 

would not alter the classification of any 

product currently being marketed. 

The NMPF witness stressed that 

Federal order regulations have always 

adapted to marketing conditions and 

that the current fluid milk product 

definition should be amended to reflect 

changes in market conditions brought 

about by changes in technology. The 

witness testified that technology has 

evolved such that milk can now be 

separated into numerous components 

that can be recombined to create a vast 

number of new milk products. The 

witness argued that new technology has 

enabled manufacturers to manipulate 

milk components, such as removing 

lactose or substituting whey for other 

milk solids, to create new products that 

contain less than 6.5 percent nonfat 

milk solids. This enables manufacturers 

of the new products to avoid 

classification of the new product as a 

fluid milk product even though the form 

and use does not differ from what is 

currently considered a fluid milk 

product. 

The NMPF witness testified that Carb 

Countdown®, a product manufactured 

by the H.P. Hood Company, contains 

whey and has a reduced lactose content 

that results in its composition being 

below the 6.5 percent nonfat milk solids 

standard. According to the witness, two 

market research studies suggest that the 

product is similar in form and use to 

traditional fluid milk. Relying upon a 

market study conducted by IRI, a market 

research firm, the witness related that 

98.4 percent of Carb Countdown® sales 

are purchased as a substitute for fluid 

milk while only 1 percent of its sales are 

represented as an expansion of the fluid 

milk market. 

The NMPF witness was of the opinion 

that classifying a product on the basis of 

protein is appropriate because protein is 

the highest valued skim component in 

the marketplace. The witness testified 

that a 2.25 percent protein standard is 

the appropriate equivalent of the current 

6.5 percent nonfat milk solids standard. 

The witness asserted that protein has 

the most value to producers, processors 

and consumers because it contributes 

nutrition, flavor and texture to milk. 

While the witness was of the opinion 

that all dairy-derived ingredients should 

be used in computing the true protein 

standard of a product, the witness did 

not believe whey and whey product 

ingredients should be priced at the Class 

I price. The witness maintained that the 

use of whey and whey products should 

not exclude a product from the fluid 

milk product definition because 

manufacturers are using whey in their 

new products to avoid a fluid milk 

product classification. The witness also 

noted that instead of relying upon the 

Food and Drug Administration (FDA) 

standard, the Department should 

provide its own definition of whey. 

A post-hearing brief submitted on 

behalf of NMPF reiterated the positions 

testified to at the hearing. The brief 

asserted that adoption of a milk protein 

standard would close regulatory 

loopholes that prevent products 

developed as a result of new technology 

from avoiding classification as a fluid 

milk product. According to the brief, 

adoption of a true protein standard 

merely changes the way milk proteins 

are accounted for and would not change 

the classification of any product. 

However, these changes would capture 

those products currently formulated to 

avoid being classified as fluid milk 

products. 

Comments and exceptions to the 

Recommended Decision filed by NMPF 

supported the proposed adoption of the 

2.25 percent milk protein standard, the 

inclusion of all nonfat milk ingredients 

in determining a product’s composition, 

and the Class I pricing of milk protein 

concentrates (MPCs) used in fluid milk 

products. NMPF strongly opposed 

exemption of casein and caseinates used 

in fluid milk products from Class I 

pricing. They view such exemptions as 

differential treatment that could cause 

market disorder and provide incentives 

for manufacturers to use these un-priced 

ingredients in their fluid milk products. 

NMPF was of the opinion that casein 

and caseinates are not substantially 

different than MPCs to justify a different 

pricing treatment when used in fluid 

milk products. However, NMPF 

maintained that only whey resulting 

from the production of cheese should be 

exempted from Class I pricing when 

used as an ingredient in fluid milk 

products. 

NMPF comments and exceptions 

asserted that manufacturers have 

historically relied on the quantitative 

composition standards contained in the 

fluid milk product definition when 

making decisions regarding new 

product development. NMPF expressed 

opposition to the proposed reference to 

‘‘form and intended use’’ in the fluid 

milk product definition because, in 

NMPF’s opinion, it could cause 

manufacturers to decrease their use of 

dairy ingredients in order to prevent a 

product from being classified and priced 

as a fluid milk product. NMPF urged 

abandoning the ‘‘form and intended use’’ 

standard and relying solely on the 

protein and nonfat solids compositional 

standards in making classification 

decisions. 

A witness from DFA, appearing on 

behalf of DFA and Dairylea Cooperative, 

Inc., (DLC), testified in support of 

NMPF’s Proposal 7 and Proposal 2. DLC 

is a dairy farmer-member owned 

cooperative with 2,400 member farms 

located in 7 states at the time of the 

hearing. 

The DFA/DLC witness was of the 

opinion that the purpose of the hearing 

was to refine the fluid milk product 

definition to reflect current market 

conditions brought about by 

technological innovations to ensure that 


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dairy farmers are equitably paid for their 

milk. The witness testified that dairy 

processing technology, such as ultra 

filtration and milk component 

fractionalization, has enabled new 

products to be developed that were not 

foreseen when the current classification 

definition was last considered. 

The DFA/DLC witness testified that 

the current fluid milk product definition 

does not recognize the value of dairy 

proteins in the development of new 

products and therefore does not classify 

and subsequently price these new 

products appropriately. The witness 

claimed that manufacturers formulate 

their products to contain less than 6.5 

percent total nonfat milk solids to avoid 

a Class I use of milk classification even 

though these products compete directly 

with and are substitutes for fluid milk. 

The DFA/DLC witness was of the 

opinion that the form and use of a 

product should be the primary factor in 

determining product classification. The 

witness said that secondary criteria used 

to make classification determinations 

should include such factors as product 

composition, a specific but not 

exclusive list of included and excluded 

dairy products, product substitutability 

and enhancement of producer revenue. 

The witness argued that eliminating the 

current total nonfat milk solids standard 

and replacing it with an equivalent milk 

protein standard would better reflect the 

demand for dairy proteins in the 

marketplace. 

The DFA/DLC witness offered a 

modification to Proposal 7 that the 

witness said would provide the 

Department with latitude for classifying 

future products that are a result of new 

technology. The witness explained that 

the modification would allow the 

Department to make an interim 

classification decision for a new product 

and then have up to one year to hold a 

public hearing to determine the 

appropriate permanent classification. 

The DFA/DLC witness also testified in 

support of Proposal 2. The witness said 

that its adoption would recognize the 

importance of dairy proteins in the 

marketplace by including all dairy 

protein sources, including whey and 

whey products, in computing the 

product’s protein content. However, 

said the witness, while whey and whey 

products would be used in classification 

determinations, those ingredients 

should not be priced as Class I. 

A post-hearing brief submitted on 

behalf of DFA/DLC reiterated support 

for adopting a protein standard. The 

brief reiterated the claim that new 

technology has enabled some products 

that contain less than 6.5 percent nonfat 

milk solids to be classified at a lower 

use-value than competitors in the 

market. The brief maintained that 

adoption of a protein standard would 

more adequately identify products that 

should be classified as fluid milk 

products in light of new fractionation 

technology. 

A witness appearing on behalf of O– 

AT–KA Milk Products Cooperative, Inc. 

(O–AT–KA) testified in support of 

Proposals 2 and 7. O–AT–KA, at the 

time of the hearing, was a cooperative 

owned by the dairy farmer-members of 

Upstate Farms Cooperative, Inc., 

Niagara Milk Cooperative, Inc., and 

Dairylea Cooperative, Inc. The witness 

was of the opinion that the development 

of new technology necessitates a change 

to the fluid milk product definition. 

However, the witness cautioned that 

changes should not capture all 

beverages which contain milk solids as 

fluid milk products because not all 

milk-containing beverages compete with 

fluid milk. 

The O–AT–KA witness asserted that 

Proposal 7 should not be thought of as 

a fundamental change to the current 

standard; rather that the proposed true 

protein standard of 2.25 percent is an 

equivalent to the current 6.5 percent 

nonfat milk solids standard and should 

be considered as a needed clarification 

brought about by technological 

advances in milk processing. According 

to the witness, the proposed 2.25 

percent standard recognizes protein as a 

highly valued ingredient in milk 

products and those products with less 

than 2.25 percent protein would remain 

exempt from fluid milk product 

classification. The witness also 

advocated the adoption of Proposal 2 

that would include whey and whey 

products in the computation of the 

protein percentage of the product but 

would not price the whey ingredients at 

Class I prices. 

A post-hearing brief, submitted on 

behalf of O–AT–KA, reiterated support 

for Proposal 7. The brief claimed that 

the adoption of the protein standard 

would increase the use of dairy 

ingredients in beverages which are not 

‘‘in the competitive sphere of the 

traditional milk beverages,’’ thus 

increasing producer revenue. The brief 

also supported DFA/DLC’s modification 

to Proposal 7 giving the Department 

authority to make an interim 

classification decision if a new product 

is a result of new technology. 

Comments and exceptions to the 

Recommended Decision submitted on 

behalf of DFA, DLC, O–AT–KA and 

Upstate Farms Cooperative Inc., 

hereinafter referred to as ‘‘DFA, et al.’’, 

supported the recommendation 

incorporating a 2.25 percent true protein 

standard as a proposal in the 

Recommended Decision and that 

inclusion of all milk derived ingredients 

when computing the 6.5 percent nonfat 

solids or 2.25 percent true protein 

criterion. The DFA, et al., comments 

also endorsed the comments and 

exceptions submitted on behalf of 

NMPF. 

DFA, et al., expressed opposition to 

exempting casein and caseinates from 

Class I pricing when used in fluid milk 

products. The comments argued that all 

proteins in a fluid milk product should 

be priced the same—at the Class I price. 

DFA, et al., also abandoned their 

position taken at the hearing to not price 

whey derived from cheese making at the 

Class I price when used in fluid milk 

products. DFA, et al., was of the opinion 

that providing exemption for 

ingredients will only serve to encourage 

manufacturers to use price-exempted 

ingredients to formulate a finished 

product that would be compositionally 

identical to fluid milk. 

DFA, et al., took exception to relying 

on form and intended use as the final 

determinate in classifying fluid milk 

products. DFA, et al., argued that 

manufacturers rely on the compositional 

criteria contained in the fluid milk 

product definition to decide how to 

formulate a new product, assess how 

their new product would be classified, 

and ultimately determine their raw milk 

ingredient costs. Their exceptions 

asserted if form and intended use 

criteria supersedes compositional 

standards, manufacturers would 

develop fewer dairy based products 

because of the perceived uncertainty in 

how that product’s ingredients could be 

classified and priced. DFA, et al., argued 

that the 2.25 percent protein standard 

should be the ultimate determinate of a 

fluid milk product and, if such 

compositional standard becomes 

inadequate, a hearing could be held to 

establish updated compositional 

standards. 

A post-hearing brief submitted on 

behalf of Select Milk Producers, Inc. 

(Select) and Continental Dairy Products 

(Continental) expressed support for 

adoption of a protein standard as a 

component of the fluid milk product 

definition. According to the brief, Select 

and Continental are dairy-farmer owned 

cooperatives that market milk on 

various Federal orders. The brief argued 

that adoption of a protein standard is a 

needed change to reflect changed 

marketing conditions brought about by 

new manufacturing technology without 

fundamentally altering current 

regulations. The brief stressed that milk 

proteins are valuable ingredients in 

drinkable products in the market and 


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that classification and pricing 

determinations should be reflective of 

this. 

Comments to the Recommended 

Decision filed on behalf of Select and 

Continental specifically supported the 

proposed adoption of a 2.25 percent true 

protein standard to the fluid milk 

product definition and pricing of MPCs 

used in fluid milk products at the Class 

I price. Select and Continental also 

endorsed the comments and exceptions 

filed by NMPF. 

Select and Continental’s exceptions 

asserted that as a result of new milkprocessing technology, there is no 

barrier to using casein as a substitute 

ingredient for MPCs. In this regard, 

Select and Continental took exception to 

exempting casein and caseinates from 

Class I pricing because it would serve to 

provide an incentive to manufacturers 

to use them as a substitute for MPCs to 

avoid Class I regulation. The brief said 

relying on form and intended use to 

override compositional standards in 

making classification determinations 

would add needless ambiguity and 

subjectivity. 

A witness appearing on behalf of H.P. 

Hood testified in opposition to any 

changes to the fluid milk product 

definition. The witness was of the 

opinion that the fluid milk product 

definition should not be amended in a 

manner that would classify more dairy 

products as fluid milk products unless 

data is provided which would conclude 

that such products compete directly 

with fluid milk and such amendments 

would enhance producer revenue. 

The H.P. Hood witness asserted that 

if Proposal 7 was adopted and resulted 

in the reclassification of some products 

as fluid milk products, the change 

would only affect a small number of 

products and the enhancement of 

producer revenue would be minimal. If 

ingredient substitution for milk 

occurred as a result of adopting other 

proposals, the witness said, producer 

revenue could actually decrease. The 

witness was of the opinion that 

adoption of proposals that broaden the 

fluid milk product definition would 

stifle product innovation and discourage 

the use of dairy-derived ingredients 

because of the resulting increased costs 

to the manufacturer. These results, the 

witness said, should not be encouraged 

by the Federal milk order program. 

A post-hearing brief submitted on 

behalf of H.P. Hood reiterated 

opposition to Proposal 7. The brief 

maintained that no disorderly marketing 

conditions exist to warrant a change to 

the fluid milk product definition and 

that proponents of the protein standard 

failed to meet the burden of proof 

required by the AMAA to make a 

regulatory change. The H.P. Hood brief 

reviewed many factors used by the 

Department in previous classification 

decisions to determine the proper 

classification of Class I products. The 

list included, but was not limited to, 

demand elasticities, enhancement of 

producer revenue, and product 

competition. The brief stated that 

proponents failed to provide adequate 

data addressing these factors or prove 

that disorderly marketing conditions 

exist to warrant a change, and urged the 

Department to terminate the proceeding. 

Comments and exceptions filed by 

H.P. Hood took exception to the 

Recommended Decision’s proposed 

adoption of a 2.25 percent protein 

standard and its reliance on form and 

intended use as a primary factor in 

making classification determinations. 

H.P. Hood reiterated its opinion that the 

proponents of the protein standard did 

not provide adequate justification for its 

adoption. Furthermore, H.P. Hood was 

of the opinion that it is not proper to 

make regulatory changes as preventive 

measures to possible disorderly 

marketing conditions and is a major 

deviation from historical milk order 

policy. The exceptions stressed that it is 

only proper to react to marketing 

conditions once they occur. In their 

exceptions, H.P. Hood also presented a 

list of questions regarding the 

application of how a product’s form and 

intended use would be determined by 

the Department. H.P. Hood claimed that 

relying on form and intended use would 

be extremely burdensome and serve to 

inhibit new product development. 

A witness appearing on behalf of 

Leprino Foods Company (Leprino) 

testified in opposition to the adoption of 

the 2.25 percent protein standard 

contained in Proposal 7. According to 

the witness, Leprino operates nine 

plants in the United States that 

manufacture mozzarella cheese and 

whey products. The witness was of the 

opinion that a protein standard would 

reclassify products such as sport and 

protein drinks and yogurt smoothie 

products (formulated with ingredients 

such as whey and whey products) as 

fluid milk products. The witness 

stressed that broadening the fluid milk 

product definition to account for all 

dairy derived ingredients could lessen 

the demand for such ingredients. The 

witness speculated that manufacturers 

may seek out other less costly non-dairy 

ingredient substitutes which would 

result in decreased producer revenue. 

Exceptions to the Recommended 

Decision filed by Leprino expressed 

opposition to the adoption of a 2.25 true 

protein standard in the fluid milk 

product definition. Leprino argued that 

this standard should not be adopted 

unless it is modified to specifically 

exclude beverages that do not resemble 

or compete with fluid milk. Leprino was 

of the opinion, that without such 

exclusion, to classify products based on 

form and intended use could cause 

many non-traditional products, such as 

sport and nutritional beverages, to be 

classified as fluid milk products. The 

end result, argued Leprino, would be a 

lowered demand for dairy ingredients 

that may offset any revenue gains to 

producers by including additional 

products as fluid milk products. 

A witness appearing on behalf of 

Dannon Company, Inc. (Dannon) 

testified in opposition to Proposals 2 

and 7. Dannon is a wholly owned 

subsidiary of the Dannon Group that 

produces yogurt and fresh dairy 

products in 40 countries, including the 

United States. The witness was opposed 

to the adoption of a protein standard 

and to the inclusion of whey when 

calculating the nonfat milk solids 

content of a product because, the 

witness said, it was not the original 

intent of the fluid milk product 

definition to include these milk-derived 

ingredients. The witness believed that 

adoption of a protein standard would 

cause more products to be classified as 

fluid milk products even though they do 

not compete with fluid milk. The 

witness argued that protein is not a 

major component of fluid milk products 

and therefore using a protein standard 

would not be appropriate for making 

classification determinations. The 

witness speculated that if a protein 

standard was adopted, it could stifle 

product innovation or cause food 

processors to use non-dairy ingredients 

in their food products. The witness said 

that if whey proteins are included, 

manufacturers may look for less 

expensive non-dairy ingredients to be 

used as a viable substitute. 

A post-hearing brief submitted on 

behalf of Dannon reiterated their 

opposition to the adoption of a protein 

standard claiming that adequate 

justification for such a change was not 

given by proponents at the hearing and 

that the mere ability to test for milk 

proteins does not justify its adoption. 

A post-hearing brief submitted on 

behalf of the National Yogurt 

Association (NYA) expressed opposition 

to Proposal 7. According to the brief, 

NYA is a trade association representing 

manufacturers of live and active culture 

yogurt products and suppliers of the 

yogurt industry. The brief claimed that 

proponent testimony was inconsistent 

regarding the proposals’ impact on 

product classification and stated that if 


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the 2.25 percent protein standard was 

adopted, at least one yogurt-containing 

product would be reclassified as a fluid 

milk product. 

The NYA brief also asserted that 

proponents did not provide a clear 

picture of how Proposal 7 would be 

implemented. Specifically, the brief 

noted that the following were not 

addressed: (1) How wet and dry whey 

would be handled; (2) how whey from 

cheese production would be 

differentiated from whey from casein 

production; and (3) how products that 

meet the proposed 2.25 percent true 

protein standard and contain whey and 

other proteins would be classified and 

priced. The NYA brief speculated that 

including whey in the protein 

calculation would lead to more products 

being classified as fluid milk products 

and cause manufacturers to seek out less 

costly non-dairy ingredients. The 

potential loss to producer revenue by 

substitution with non-dairy ingredients, 

concluded the brief, is not supported by 

the record. 

A post-hearing brief submitted on 

behalf of the National Cheese Institute 

(NCI) expressed opposition to Proposal 

7 and claimed that its adoption would 

suppress the use of dairy-derived 

ingredients, particularly whey proteins. 

According to the brief, NCI is a trade 

association representing processors, 

manufacturers, marketers, and 

distributors of cheese and related 

products. NCI claimed that proponents 

of Proposal 7 did not identify any 

specific marketplace disorder that 

would be corrected by the adoption of 

a protein standard or list any product 

that would be reclassified if the fluid 

milk product definition were amended. 

The brief reviewed previous rulemaking 

decisions where proposals were denied 

because proponents failed to 

demonstrate that disorderly marketing 

conditions were present. 

The NCI brief stressed that use of 

dairy-derived ingredients in a product 

should not automatically qualify a 

product as a competitor of fluid milk or 

that their classification in a lowervalued use negatively affects producer 

revenue. The brief further maintained 

that proponents did not adequately 

address why whey proteins should be 

included in determining if the product 

met the proposed protein standard for a 

fluid milk product and why whey 

should be priced at the Class I price. 

The brief concluded that whey should 

be excluded from the fluid milk product 

definition because its inclusion would 

lead to products being classified as fluid 

milk products even when they do not 

compete with fluid milk. 

A post-hearing brief submitted on 

behalf of Sorrento Lactalis, Inc. 

(Sorrento) objected to the adoption of a 

protein standard. According to the brief, 

Sorrento is a manufacturer that operates 

five cheese plants throughout the 

United States. The brief stated that 

adoption of a milk protein standard as 

part of the fluid milk product definition 

would reduce the demand for dairy 

ingredients, especially whey proteins, 

which in turn would result in increased 

costs to manufacturers and reduced 

producer revenue. 

A witness testifying on behalf of H.P. 

Hood was of the opinion that if the 

Department found that changing the 

fluid milk product definition was 

warranted, adoption of a modified 

Proposal 5 would be appropriate. The 

witness said that adoption of Proposal 5 

would provide the Department with 

standards to determine if a dairy 

product with less than 6.5 percent 

nonfat milk solids competes with and 

displaces fluid milk sales, which would 

justify classification of the product as a 

fluid milk product. The witness also 

noted that if Proposal 5 was adopted, a 

new product with less than 6.5 percent 

nonfat milk solids and route 

distribution in a Federal milk marketing 

area of less than 3 million pounds 

would be exempted from classification 

as a fluid milk product. This 

distribution criteria, the witness 

explained, would allow manufacturers 

to test market a new product with the 

assurance that it would not be classified 

as a fluid milk product until the 

distribution threshold was exceeded. 

A witness appearing on behalf of 

Leprino testified in support of Proposal 

5. The witness was of the opinion that 

fluid milk products should only be 

those products that meet the FDA 

standard of identity for milk and 

cultured buttermilk and products that 

compete with milk and cultured 

buttermilk. The witness testified that 

the fluid milk product definition is 

currently too broad and as a result, has 

lessened the demand for dairy 

ingredients in new non-traditional dairy 

products because of the possibility of 

being classified as a fluid milk product. 

The witness argued that many of these 

new products do not compete for sales 

with fluid milk and their use of dairyderived ingredients should not qualify 

them to be defined as a fluid milk 

product. 

The Leprino witness explained that 

advances in technology have allowed 

the creation of dairy-derived ingredients 

through milk fractionation. According to 

the witness, dairy manufacturers are 

avoiding investing in some product 

innovation because of the regulatory 

burden and increased costs that are 

associated with manufacturing a fluid 

milk product. 

A witness testifying on behalf of DFA/ 

DLC was opposed to the adoption of 

Proposal 5. The witness said that 

Proposal 5 would place an undue 

burden on the Department in making 

classification determinations and would 

also extend Class II classification to 

more products, neither of which the 

witness supported. The post-hearing 

brief submitted by DFA/DLC reiterated 

their opposition. 

A witness appearing on behalf of 

Bravo! Foods International Corporation; 

Lifeway Foods, Inc.; PepsiCo; Starbucks 

Corporation; and Unilever United 

States, Inc.; testified in opposition to all 

proposals that would reduce or 

eliminate the 6.5 percent minimum 

nonfat milk solids standard, adopt a 

protein standard, or include whey in 

determining the nonfat milk solids 

content of a product. Hereinafter, these 

companies are referred to collectively as 

‘‘Bravo!, et al.’’ 

A post-hearing brief submitted on 

behalf of Bravo!, et al., urged the 

termination of the proceeding except for 

the portion addressing the exemption of 

yogurt and kefir products from the fluid 

milk product definition. Bravo!, et al., 

asserted that the hearing record does not 

support adoption of a protein standard. 

The brief stated that decisions to amend 

Federal order provisions are not made 

without clear evidence of disorderly 

market conditions, the potential 

shortage of milk for fluid use, or 

lowering of producer revenue. The brief 

also discussed letters sent to the 

Department by producers and 

manufacturers which urged that a 

hearing be postponed because more 

analysis and market data was needed to 

justify amending the current fluid milk 

product definition. Bravo!, et al., argued 

that the hearing was held prematurely, 

without allowing for adequate study and 

market data research on the proposals 

that are under consideration. According 

to the brief, more time was needed to 

accurately determine the impact of new 

milk products on the marketplace. 

The Bravo!, et al., brief summarized 

hearing testimony from previous 

Department rulemaking decisions in 

which no changes were recommended 

due to a lack of evidence to support a 

regulatory change. According to Bravo!, 

et al., proponents did not provide 

evidence of disorder in the marketplace 

nor did they substantiate their claims 

that products currently in the market 

would not be reclassified if a protein 

standard was adopted. On the basis of 

such conditions, the brief concluded 


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that the current fluid milk product 

definition is adequate. 

If the Department did not terminate 

the proceeding, the Bravo!, et al., brief 

recommended that the 6.5 percent 

nonfat milk solids standards remain, 

that the computation of nonfat milk 

solids not be made on a milk 

equivalency basis, and that whey and 

whey ingredients be excluded from the 

computation. 

Exceptions to the Recommended 

Decision filed by Bravo!, et al., opposed 

the proposed adoption of the 2.25 

percent protein compositional standard 

and reiterated that adoption of a protein 

standard would have a negative effect 

on dairy product innovation as 

manufacturers would use lower priced 

non-dairy proteins as substitutes. 

Bravo!, et al., asserted that the 

Department did not give enough 

consideration to the lowering of 

producer revenue that could occur due 

to the predicted ingredient substitution. 

Exceptions filed by Bravo!, et al., also 

opposed the Department’s use of form 

and intended use as one of the factors 

in making classification determinations. 

The comments acknowledged that the 

AMAA authorized the Federal Milk 

Marketing Order (FMMO) program to 

rely on form and intended use in 

making classification determinations. 

However, Bravo!, et al., asserted that 

historically the FMMO program applied 

the form and use criteria by using 

compositional standards. Bravo!, et al., 

claimed that by specifically including 

the form and intended use criteria in the 

order language the Department could 

ignore a product’s composition and 

arbitrarily classify products as fluid 

milk products even though they did not 

compete with fluid milk. Bravo!, et al., 

predicted that the specific inclusion of 

form and intended use in the fluid milk 

product definition would hamper the 

development of new products and the 

use of dairy ingredients because of the 

uncertainty manufacturers could face in 

how the milk components of their 

products would be classified. 

A witness appearing on behalf of 

Fonterra USA, Inc. (Fonterra) testified in 

opposition to proposals that would 

include MPCs in determining if the 

product met the protein standard of the 

fluid milk product definition. Fonterra 

at the time of the hearing was a wholly 

owned subsidiary of Fonterra Cooperative Group Limited, a New 

Zealand based dairy cooperative owned 

by 12,000 New Zealand dairy farmers. 

Fonterra operates plants within the 

United States that produce, among other 

things, MPCs. The witness stressed that 

changes to the fluid milk product 

definition would increase ingredient 

costs, discourage manufacturing 

companies from using dairy ingredients 

in their products, and force those 

companies to seek other less costly 

substitutes such as soy and soy 

products. 

A post-hearing brief submitted on 

behalf of Fonterra reiterated their 

objection to changing the nonfat milk 

solids standard and predicted that 

adoption of a protein standard would 

make classification decisions 

unnecessarily complicated without 

providing additional benefits to 

producers. The brief asserted that the 

hearing record did not contain a 

sufficient economic analysis on the 

possible benefits that adopting a protein 

standard would have on producer 

revenue or its impact on the dairy 

industry. 

The Fonterra brief speculated that 

adoption of a milk protein standard 

would decrease the market price for 

milk proteins, discourage new product 

development, and encourage the 

substitution of producer milk with nondairy ingredients. The brief noted that 

the annual growth rate of soy and soy 

products in nutritional products from 

1999 to 2003 was 16.5 percent, while 

the growth of milk proteins in 

nutritional products only increased 10.1 

percent over the same time period. The 

brief predicted that if protein prices rise 

as a result of the adoption of a milk 

protein standard, the growth of soy 

proteins will likely increase because 

they could be substituted for more 

costly milk proteins. 

The Fonterra brief also stated that the 

hearing record does not reveal disorder 

in the market by the application of the 

current fluid milk product definition 

and therefore concluded that amending 

the fluid milk product definition is not 

justified. The Fonterra brief argued that 

proponents did not provide adequate 

reasoning for including whey proteins 

in determining if a product met the 

protein standard but not pricing whey 

proteins the same as other milk 

proteins. Furthermore, the brief stated 

that proponents did not propose a 

method for differentiating between 

whey proteins resulting from cheese 

production and whey proteins from 

other sources. 

Comments filed on behalf of Fonterra 

took exception to the Recommended 

Decision’s proposed adoption of a 2.25 

percent true milk protein compositional 

standard. Fonterra reiterated that 

proponents did not meet the burden of 

proof needed to substantiate the 

adoption of a protein standard. 

According to the comments, proponents 

did not indicate if adoption of the 

standard would remedy any indications 

of market disruption or reclassify some 

products as fluid milk products. 

Fonterra’s comments reviewed 

numerous rulemaking proceedings in 

which, Fonterra concluded, the 

Department declined to adopt proposed 

changes to marketing orders because of 

a lack of evidence that a change would 

promote orderly marketing conditions. 

Fonterra argued that the Recommended 

Decision did not adequately consider 

evidence asserting that adoption of the 

milk protein standard would not 

increase the cost for dairy ingredients, 

encourage the substitution of lower cost 

non-dairy ingredients, and ultimately 

lower producer revenue. Fonterra was of 

the opinion that before making a Final 

Decision, further analysis of the 

proposals was needed to fully evaluate 

the possible economic impact to 

producers and manufacturers as a result 

of adoption of the protein standard. 

Fonterra stated that the Department’s 

recommended adoption of an ‘‘either/or’’ 

use of the protein and nonfat solids 

standard was not contained in any 

proposal discussed at the hearing and 

that the Department did not adequately 

explain how the use of both a protein 

and nonfat solids standard would 

provide for the orderly marketing of 

milk or increase producer revenue. 

The comments filed by Fonterra also 

argued that the Department uses this 

rulemaking proceeding to justify a 

change in policy that the Department 

previously attempted to adopt without 

undertaking the formal rulemaking 

process. Fonterra stated that historical 

Departmental policy has been to exempt 

such products as casein, sodium 

caseinate, lactose, whey, and MPCs from 

use in the nonfat milk solids calculation 

of a product. In 2004, Fonterra said, the 

Department attempted to include MPCs 

and other previously exempted dairy 

ingredients in the nonfat solids 

calculation; however, that 

administrative decision was overturned 

by an Administrative Law Judge. 

Fonterra claimed that proposing to 

include all milk derived protein 

ingredients in the calculation of a 

product’s nonfat solids or protein 

composition is an attempt to change 

historical policy without adequate 

analysis or justification. 

Fonterra also took exception to having 

some ingredients included in the 

calculation of a product’s composition 

but would not be priced in a final 

product. Fonterra claimed that whey is 

used in nearly identical products as 

MPCs and should therefore be priced 

the same. Fonterra was of the opinion 

that pricing whey and MPCs differently 

would violate the United States’ World 

Trade Organization obligations. Fonterra 


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characterized whey production as 

primarily domestic, but that most MPCs 

are imported. Accordingly, they 

concluded that excluding whey from 

Class I pricing essentially places an 

illegal tariff on imported MPCs. 

A witness appearing on behalf of the 

American Beverage Association (ABA) 

testified in opposition to all proposals 

seeking to amend the fluid milk product 

definition. ABA is a trade association 

that represents beverage producers, 

distributors, franchise companies, and 

their supporting industries. The witness 

was of the opinion that the current fluid 

milk product definition already 

properly classifies dairy products and 

that there is insufficient evidence to 

warrant any changes. The witness 

claimed that any change would broaden 

the fluid milk product definition to 

include products that contain only 

small amounts of milk. The witness 

argued that many new beverage 

products which contain small amounts 

of milk or milk ingredients do not 

compete with fluid milk but do compete 

with soft drinks, juices and bottled 

water. The witness asserted that 

amending the fluid milk product 

definition to include some dairy 

ingredients not currently considered 

would increase manufacturers cost of 

production, result in stifled innovation 

of new products and encourage the use 

of non-dairy ingredients as substitutes 

for milk-derived ingredients. 

A witness appearing on behalf of Ohio 

Farmers Union (OFU) testified in 

opposition to any change to the fluid 

milk product definition. OFU is a 

nonpartisan, grassroots, general farm 

organization representing more than 

300,000 family farms nationwide 

according to their web site. The witness 

testified that the primary purpose of the 

order program was to provide 

consumers with a reliable supply of safe 

and wholesome milk. The witness 

asserted that MPCs, caseinates, whey 

proteins, and other similar milk-derived 

ingredients have functional and 

nutritional characteristics different than 

fluid milk. Accounting for those 

ingredients in the fluid milk product 

definition, the witness said, would 

undermine the goal of the order 

program. The witness stressed that if the 

fluid milk product definition were 

amended, consumer confidence in the 

long established perception of milk as a 

fresh, pure and wholesome beverage 

would be diminished and would thus 

threaten the economic viability of 

domestic producers. 

A witness appearing on behalf of the 

Milk Industry Foundation (MIF) 

testified in opposition to amending the 

fluid milk product definition. According 

to the witness, MIF is an organization 

with over 100 member companies that 

process and market approximately 85 

percent of the fluid milk and fluid milk 

products consumed nationwide. The 

witness stated that simply because a 

beverage contains milk or other dairyderived ingredients does not prove that 

those products compete with fluid milk 

or that such competition lowers 

producer revenue. 

The MIF witness asserted that 

previous Federal milk order rulemaking 

decisions have required data and 

analysis to prove that an amendment 

was warranted. According to the 

witness, the proponents of proposals for 

changing the fluid milk product 

definition did not provide such data and 

analysis. Along this theme, the witness 

said that proponents should have 

provided data such as the market share 

held by products that do not fall under 

the current fluid milk product definition 

but would be included under any 

proposed change, cross price elasticity 

of demand analysis of products which 

meet the existing fluid milk product 

definition and of products that would be 

classified as a fluid milk product if any 

of their proposals were adopted, and an 

own-price elasticity of demand analysis 

for products that would be reclassified. 

A post-hearing brief submitted on 

behalf of MIF reiterated their opposition 

to any changes to the current fluid milk 

product definition. The brief urged that 

if the Department does amend the fluid 

milk product definition, it should 

exclude all whey-derived protein 

products in determining if a product 

meets the fluid milk product definition. 

The brief stated that MIF has 

continuously opposed a hearing to 

consider amending the fluid milk 

product definition because not enough 

evidence is available to warrant a 

change. The brief maintained that 

proponents did not offer adequate data 

at the hearing to demonstrate that there 

is disorder in the marketplace that can 

be remedied by adoption of a protein 

standard. 

The MIF brief expanded its testimony 

by citing numerous rulemaking 

decisions that denied proposals on the 

basis that adequate evidence was not 

presented to warrant amendments to 

order provisions. MIF stressed that the 

mere existence of beverages containing 

dairy-derived ingredients is not 

evidence of marketwide disorder. 

Exceptions filed on behalf of 

International Dairy Foods Association 

(IDFA) asserted that because evidence 

doesn’t demonstrate a need for change, 

no changes to the fluid milk product 

definition should be made. IDFA is a 

trade organization whose members 

include MIF, NCI and the International 

Ice Cream Association (IICA). According 

to their exceptions, IDFA represents 

more than 85 percent of the milk, 

cultured products, cheese and frozen 

desserts produced and marketed in the 

United States. IDFA reiterated 

arguments expressed by MIF at the 

hearing and in MIF’s post-hearing brief. 

Their exception claimed that the 

hearing record did not demonstrate that 

products containing less than 6.5 

percent nonfat solids and more than 

2.25 percent protein are causing 

disorderly marketing conditions because 

they are not currently classified as fluid 

milk products. 

IDFA’s comments also opposed the 

specific inclusion of the form and 

intended use criteria in the fluid milk 

product definition and argued that the 

definition should continue to contain 

only compositional criteria. IDFA wrote 

that manufacturers’ product 

development decisions are in part 

determined by ingredient costs. 

Subjective criteria such as form and 

intended use, wrote IDFA, could 

impede new product development 

because a manufacturer would be 

uncertain of ingredient costs until a 

final product had been classified. 

IDFA’s exceptions opposed the 

inclusion of whey when computing a 

product’s composition because of 

inconsistent justification by proponents 

as to why whey used to produce fluid 

milk products should not also be priced 

as Class I. IDFA exceptions stated that 

the proponents of the protein standard 

did not demonstrate that disorderly 

marketing conditions exist in the 

absence of the protein standard. IDFA 

exceptions concluded that the adoption 

of amendments proposed in the 

Recommended Decision would only 

serve to lower producer revenue. 

Comments filed on behalf of Grande 

Cheese opposed all the proposed 

changes to the fluid milk product 

definition contained in the 

Recommended Decision. Grande Cheese 

is a cheese manufacturer located in the 

State of Wisconsin. Grande Cheese 

expressed support of the opinions 

expressed in the exceptions to the 

Recommended Decision filed by IDFA. 

A witness appearing on behalf of the 

National Family Farm Coalition testified 

in opposition to all proposals that 

would amend the fluid milk product 

definition. The witness testified that 

MPCs do not meet FDA’s Generally 

Recognized as Safe (GRAS) standards as 

legal food ingredients. Furthermore, the 

witness said, MPCs have not been 

subjected to scientific testing to 

determine if they are safe for human 


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consumption and should not be allowed 

in milk products. 

A witness appearing on behalf of 

Public Citizen testified in opposition to 

proposals that seek to amend the fluid 

milk product definition. According to 

the witness, Public Citizen is a nonprofit consumer advocacy organization 

with approximately 150,000 members. 

The witness was opposed to any change 

in the fluid milk product definition that 

would, in the witness’ opinion, 

encourage the use of MPCs. 

Two Pennsylvania dairy farmers 

testified in opposition to any change to 

the fluid milk product definition. The 

producers opposed all proposals that 

would allow the use of caseinates and 

MPCs in fluid milk products. They 

asserted that MPCs are not allowed in 

the production of standardized cheese 

and should also not be allowed in the 

production of fluid milk products. 

A post-hearing brief submitted on 

behalf of the American Dairy Products 

Institute (ADPI), an association 

representing manufacturers of dairy 

products, offered support for amending 

the fluid milk product definition to 

include milk beverages that compete 

directly with fluid milk. However, the 

brief cautioned against developing a 

fluid milk product definition that would 

include non-traditional beverages and 

smoothie type products (yogurtcontaining beverages). The brief 

recommended that an economic study 

be conducted to determine the possible 

impacts of the proposed changes before 

action is taken to amend the fluid milk 

product definition. 

A post-hearing brief submitted on 

behalf of General Mills contended that 

the fluid milk product definition should 

not be amended because proponents did 

not provide sufficient evidence or data 

to justify a change. The brief maintained 

that the hearing record is not clear on 

how proposals would be implemented 

or on the impact to producers, 

manufacturers, and consumers if the 

protein standard was adopted. General 

Mills contended that before a change is 

made, the Department should conduct 

an economic analysis to evaluate how 

protein and dairy products are 

competing in the marketplace and how 

the adoption of a protein standard 

would impact the marketplace. If a 

protein standard was recommended for 

adoption, General Mills recommended 

that whey not be included in the protein 

calculation, or if whey is included, that 

a 2.8 percent protein standard be 

adopted in order to maintain the status 

quo. 

Exceptions to the Recommended 

Decision filed by General Mills opposed 

the adoption of the true protein 

compositional standard. However, 

General Mills was of the opinion that if 

the Department continued to support 

the protein standard, then any whey 

components should be excluded from 

determining a final product’s protein 

content. General Mills purported that 

the inclusion of whey in the protein 

calculation, even if not priced at Class 

I, may lead manufacturers to increase 

their use of non-dairy ingredients as 

substitutes. 

General Mills was also opposed to 

relying on form and intended use in 

classification determinations. According 

to their exceptions, the form and use 

criteria would cause manufacturers to 

be less certain of a product’s 

classification which would discourage 

using dairy ingredients in new products. 

General Mills noted that if the 

Department decides to not alter its 

Recommended Decision then it should 

clarify in a Final Decision that only 

products that compete with or are a 

substitute for fluid milk would be 

classified as a fluid milk product. 

A post-hearing brief submitted on 

behalf of New York State Dairy Foods, 

Inc. (NYSDF) opposed amending the 

fluid milk product definition. According 

to their brief, NYSDF is a trade 

association representing dairy product 

processors, manufacturers, distributors, 

retailers, and producers in the Northeast 

United States. The brief argued that 

products produced with the use of new 

fractionation technology are a small 

portion of the milk beverage market. 

They were of the opinion that such 

products are still too new to determine 

their impact on Class I sales and 

producer revenue. The brief also 

asserted that the adoption of a protein 

standard as part of the fluid milk 

product definition would discourage 

new product development and would 

increase costs that would result in 

reduced sales of dairy-derived 

ingredients. The brief urged that the 

proceeding be terminated. 

Comments and exceptions to the 

Recommended Decision filed on behalf 

of Glanbia Foods (Glanbia) opposed the 

proposed adoption of the true protein 

compositional standard and the specific 

inclusion of form and intended use as 

a factor in classification determinations. 

Glanbia operates two cheese plants and 

two whey plants that collectively 

process nearly 4 billion pounds of milk 

annually. Glanbia asserted that adoption 

of a true protein standard would lead to 

stifled innovation of milk derived 

ingredients in new products because the 

manufacturing industry would increase 

its use of non-dairy ingredients as 

substitutes. Their exceptions claimed 

that the hearing record does not contain 

evidence that adoption of a protein 

standard would ultimately benefit 

producers or remedy a market disorder. 

Glanbia also argued that the 

Department’s reliance on form and 

intended use in classification 

determinations would similarly 

discourage the use of dairy ingredients. 

A professor from Cornell University 

testified regarding a research study 

conducted by the Cornell Program on 

Dairy Markets and Policy that focused 

on the demand elasticity’s of various 

dairy products. The witness did not 

appear in support of or in opposition to 

any proposal presented at the hearing. 

The witness explained that the goal of 

the study was to ascertain the extent to 

which product innovation and 

classification decisions influence 

producer revenue. The study was 

designed to evaluate four hypothetical 

dairy products and test the effect that a 

range of classification determinations 

would have on producer revenue. The 

witness explained the study and 

concluded that the impact on producer 

revenue of a new product being 

reclassified from Class II to Class I was 

likely to be small, plus-or-minus $0.01 

per hundredweight (cwt). However, the 

witness added, if non-dairy ingredients 

were substituted as a result of the 

reclassification, the study predicted that 

producer revenue would be lowered by 

$0.22 per cwt. The witness concluded 

that while the financial returns from 

product reclassification could be 

positive, the resulting ingredient 

substitution, which could take place, 

would result in a significant negative 

impact on producer revenue. 

The post-hearing brief submitted by 

NMPF also addressed concerns 

articulated at the hearing regarding the 

need for a demand elasticity study to 

address the issue of product substitution 

before amending the fluid milk product 

definition. The brief asserted that a 

demand elasticity study would not take 

into account newly emerging products, 

changing consumer preferences, and 

product innovations that could change 

the competitive relationships between 

products and therefore would not 

provide any relevant data. The brief also 

argued that the economic model created 

by Cornell University and discussed at 

the hearing contained many incorrect 

assumptions and thus concluded that 

the study results were flawed. 

The DFA/DLC brief also rebutted 

opposition to Proposal 7 which called 

for studies of product usage or demand 

elasticity’s before considering 

amendments to the fluid milk product 

definition. The brief asserted the 

previous amendments to the 

classification system have been made 


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without such economic studies and that 

this proceeding should be handled in 

the same manner. 

A witness appearing on behalf of 

Bravo! Foods International Corporation, 

Lifeway Foods, Inc. (the principal 

makers of kefir in the U.S.), PepsiCo, 

Starbucks Corporation and Unilever 

United States, Inc. (Bravo! et al.), 

proposed at the hearing that kefir, as 

well as yogurt-containing beverages, be 

exempted from the fluid milk product 

definition. 

A witness appearing on behalf of 

Dannon testified in support of Proposal 

8 that would exclude yogurt containing 

beverages from the fluid milk product 

definition. The witness provided a 

definition of yogurt containing 

beverages as any beverage containing at 

least 20 percent yogurt (which is in 

concert with Proposal 9). The witness 

argued that yogurt containing beverages 

are not similar in form and use to fluid 

milk products and should be excluded 

from the fluid milk product definition. 

The witness testified that Dannon 

currently manufactures yogurt 

containing products which are classified 

as both fluid milk products and Class II 

products. The Dannon witness 

maintained that regardless of the 

classification, none of its products 

compete with fluid milk. According to 

the witness these products should all be 

classified as Class II. The witness 

emphasized that yogurt and yogurtcontaining products use unique 

cultures, ingredients, and production 

technology that differentiate them from 

fluid milk product production. 

Furthermore, the witness said yogurt 

products’ packaging, taste, mouth feel, 

shelf-life and marketing placement in 

grocery stores distinguishes them from 

fluid milk. 

The Dannon witness presented market 

research it had conducted. The witness 

stated, based on the research, that 

yogurt-containing beverages are 

consumed as a food product and not as 

an alternative to fluid milk. The witness 

claimed that less than one percent of 

potential consumers of a Dannon 

yogurt-containing product consume the 

product as a substitute for fluid milk. 

Additionally, the witness noted that 

Dannon advertises its yogurt-containing 

products as a substitute for snacks, not 

fluid milk. The witness concluded from 

this that yogurt-containing products are 

different than fluid milk, do not 

compete with fluid milk in the 

marketplace and therefore should not be 

classified the same as a fluid milk 

product. The witness also testified in 

opposition to Proposal 9 but only with 

respect to the inclusion of a protein 

threshold which Dannon does not 

consider justified. The witness noted 

that Dannon does support the proposed 

20 percent minimum yogurt content 

standard that such products should 

meet as a condition for being exempted 

from the fluid milk product definition. 

A post-hearing brief submitted on 

behalf of Dannon reiterated its hearing 

testimony. The brief stated that fluid 

milk products should only be those 

products that are closely related to, or 

compete with, fluid milk for sales. That 

brief stressed that yogurt-containing 

beverages are dissimilar to fluid milk 

beverages and are used as a food 

replacement, not as a beverage 

substitute. The brief noted that in 2004, 

more than 37 percent of Dannon’s sales 

were from products developed within 

the last 5 years and stressed that 

classifying all milk drinks with milkderived ingredients as fluid milk 

products would result in decreased 

innovation for developing additional 

uses for milk. 

A witness appearing on behalf of 

General Mills testified in support of 

Proposal 9. The witness was of the 

opinion that USDA should classify 

products primarily on the basis of form 

and use. The witness asserted that 

drinkable yogurt products, while 

containing milk ingredients, are food 

products and do not compete with fluid 

milk. The witness explained that 

drinkable yogurt products were created 

to meet a change in consumer 

preferences for convenience and 

portability. The witness presented 

market research conducted by Yoplait 

demonstrating that consumers view 

drinkable yogurt products as 

alternatives to traditionally packaged 

yogurt and other nutritional snacks, not 

fluid milk. The witness asserted that 80 

percent of Yoplait drinkable yogurt 

smoothie consumers would substitute 

another yogurt product for the smoothie. 

The General Mills witness supported 

the current classification system 

contending that its modification raises a 

host of issues and questions. However, 

if USDA determined that a change to the 

fluid milk product definition is 

appropriate, the witness urged adoption 

of Proposal 9 to exclude drinkable 

yogurt products that contain at least 20 

percent yogurt by weight and no more 

than 2.2 percent skim milk protein from 

the fluid milk product definition. 

According to the witness, including 

drinkable yogurt products in the fluid 

milk product definition would increase 

costs to manufacturers that would stifle 

innovation and result in a shift towards 

using non-dairy ingredients. The 

witness said manufacturers would 

choose to reformulate products using 

less milk and milk proteins resulting in 

reduced dairy producer income. 

A post-hearing brief submitted on 

behalf of General Mills maintained that 

ample evidence regarding the 

fundamental differences of fluid milk 

and yogurt containing beverages was 

presented at the hearing to justify 

exempting yogurt containing products 

with more than 20 percent yogurt from 

classification as a fluid milk product. 

Comments and exceptions to the 

Recommended Decision filed on behalf 

of General Mills reiterated this view. 

Two witnesses appearing on behalf of 

the National Yogurt Association (NYA) 

testified in support of proposals that 

would exempt yogurt containing 

products from the fluid milk product 

definition. NYA is a national trade 

association representing the producers 

of yogurt products and their suppliers. 

The witnesses testified that previous 

regulatory decisions made by USDA 

emphasized that products classified as 

fluid milk products should be intended 

to be consumed as beverages and 

compete with fluid milk. The witnesses 

expressed disagreement with a 

classification decision published in the 

early 1990’s that classified drinkable 

yogurt products as fluid milk products. 

The witnesses were of the opinion that 

in both form and use, yogurt and 

drinkable yogurt products compete with 

other food products, not fluid milk, and 

should be classified as Class II products. 

The witnesses explained that yogurt 

products are produced and shipped 

nationally by a few manufacturers, have 

a shelf-life averaging 30–60 days, have 

a texture and taste distinctly different 

than fluid milk and are positioned in 

retail stores separate from fluid milk. 

The witnesses noted that yogurtcontaining beverages were developed as 

a substitute for spoonable yogurt 

products, not fluid milk. 

The NYA witnesses were of the 

opinion that the increase in producer 

revenue resulting from currently 

classifying drinkable yogurt products as 

fluid milk products isn’t and would not 

overcome the decrease in revenue due 

to the loss of sales from an increase in 

the price of drinkable yogurt products. 

A post-hearing brief submitted on 

behalf of NYA reiterated support for 

excluding all products containing at 

least 20 percent yogurt provided that the 

yogurt meets the standard of identity for 

yogurt. According to the brief, the 20 

percent content requirement would 

ensure that only products whose 

characterizing ingredient is yogurt 

would be excluded from the fluid milk 

product definition. The brief also 

indicated that if USDA determines not 

to exclude yogurt containing products, 


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then NYA strongly opposes any change 

to the current fluid milk product 

definition. 

The NYA brief argued that consumer 

surveys and marketplace data provided 

by Dannon and General Mills that 

explained how yogurt-containing 

products are fundamentally different 

from fluid milk were not contradicted at 

the hearing. The brief also noted that 

while Dairy Farmers of America (DFA) 

and National Milk Producers Federation 

(NMPF) testified that consumers are 

buying low-carbohydrate milk instead of 

fluid milk, they did not offer similar 

evidence for yogurt-containing 

products. 

Comments and exceptions to the 

Recommended Decision filed on behalf 

of NYA supported the proposed 

exemption of drinkable yogurt products 

from the fluid milk product definition. 

The NYA comments reiterated 

arguments it made at the hearing and in 

its post-hearing brief, and asserted that 

the hearing record contains no evidence 

to support that drinkable yogurt 

products are similar to fluid milk. 

A witness appearing on behalf of 

Bravo!, et al., testified in support of 

amendments that would exempt yogurt 

containing products and kefir from the 

fluid milk product definition. The 

witness argued that both products are 

compositionally different than fluid 

milk and do not compete for sales with 

fluid milk. Furthermore, the witness 

noted that drinkable yogurt and kefir 

products are one of the fastest growing 

segments in the dairy industry, 

providing a large opportunity for the 

expanded use of dairy-derived 

ingredients which should not be 

hampered by the additional costs of 

such ingredients being priced at Class I. 

Comments and exceptions filed on 

behalf of Bravo!, et al. and by Lifeway 

Foods, separately expressed support for 

the Recommended Decision’s proposed 

exemption of kefir, and drinkable yogurt 

products that contain at least 20 percent 

yogurt. 

A witness appearing on behalf of 

Leprino Foods Company (Leprino) 

testified that if USDA recommended 

amending the fluid milk product 

definition, then Leprino supported the 

adoption of Proposal 9 to exclude 

products containing at least 20 percent 

or more yogurt by weight from the fluid 

milk product definition. According to 

the witness, Leprino operates nine 

plants in the United States that 

manufacture mozzarella cheese and 

whey products. The witness also was of 

the opinion that yogurt containing 

products do not compete with fluid 

milk and should be classified as Class 

II products. The witness stressed that if 

these products are not excluded from 

the fluid milk product definition, then 

Leprino strongly opposed the adoption 

of a protein standard to be part of the 

fluid milk product definition. 

Comments and exceptions filed on 

behalf of Leprino supported the 

Recommended Decision’s proposed 

exclusion of yogurt containing 

beverages and kefir from the fluid milk 

product definition. 

Comments filed by Fonterra USA, Inc. 

(Fonterra) supported the Department’s 

recommendation that yogurt containing 

beverages should be exempted from the 

fluid milk product definition but took 

exception to the yogurt content in 

beverages containing less that 20 

percent yogurt (i.e. Class I) not being 

subject to an ‘‘upcharge’’, as are other 

milk ingredients. Fonterra is a wholly 

owned subsidiary of Fonterra Cooperative Group Limited, a New 

Zealand based dairy cooperative owned 

by 12,000 New Zealand dairy farmers. 

The witness appearing on behalf of 

NMPF testified in opposition to 

exempting yogurt-containing beverages 

from the fluid milk product definition. 

The witness was of the opinion that 

these products are similar in form and 

use to other flavored fluid milk products 

and should be considered a substitute 

for fluid milk. In its post-hearing brief, 

NMPF maintained its opposition to 

proposals that would exclude drinkable 

yogurt products from the fluid milk 

product definition. 

Comments and exceptions filed by 

NMPF in response to the Recommended 

Decision opposed the exemption of kefir 

and yogurt containing beverages from 

the fluid milk product definition 

arguing that an exemption is 

inconsistent with the principle of form 

and intended use. NMPF reiterated 

arguments made at the hearing and in 

its post-hearing brief that kefir and 

yogurt containing beverages are almost 

identical in form to fluid milk and are 

used as beverages. NMPF purported that 

data presented at the hearing by yogurt 

manufacturers demonstrating that 

yogurt containing beverages did not 

compete with fluid milk was misleading 

and the exemption would be difficult to 

enforce. NMPF stated that because kefir 

has no standard of identity (as does 

yogurt, for example) manufacturers 

could name an array of products as kefir 

to avoid classification as fluid milk 

products. NMPF also said the standard 

of identity for yogurt was too broad and 

its identity standard is currently under 

review by the FDA. NMPF claimed that 

exempting yogurt containing beverages 

from the fluid milk product definition 

could create an enormous regulatory 

loophole that could be exploited to 

avoid classification of new products as 

fluid milk products. 

The witness appearing on behalf of 

Dairy Farmers of America and Dairylea 

Cooperative Inc. (DFA/DLC) also 

testified in opposition to the adoption of 

Proposals 8 and 9. The witness stated 

that adoption of these proposals would 

allow more products to be classified as 

Class II products even though they 

compete with fluid milk for sales. A 

post-hearing brief filed by DFA/DLC 

further claimed that the growth of 

drinkable yogurt products in the 

marketplace has not been impeded by 

previous classification decisions and 

that such products should not be 

excluded from the fluid milk product 

definition because some hearing 

participants claimed it would harm the 

innovation of new dairy products. 

In its comments to the Recommended 

Decision, Select Milk Producers, Inc. 

(Select)/Continental Dairy Products 

(Continental) opposed the exemption of 

kefir or drinkable yogurt beverages that 

contained 20 percent or more yogurt 

from the fluid milk product definition. 

According to their brief Select and 

Continental are dairy-farmer owned 

cooperatives that market milk on 

various Federal orders. 

The witness appearing on behalf of 

Leprino testified in support of Proposal 

10. The witness testified that only 

products that compete with fluid milk 

should be classified as fluid milk 

products, therefore meal replacements 

and nutritional drinks should remain 

exempted from the fluid milk product 

definition. In its exceptions to the 

Recommended Decision Leprino 

opposed the inclusion of the term 

‘‘health care industry’’ in the meal 

replacement exemption. Leprino argued 

that this qualifier could cause a product 

to hold two different classifications 

depending on how it is distributed. 

A post-hearing brief submitted on 

behalf of Novartis stated that the 

Department should exempt special 

dietary need and nutritional beverages 

from the fluid milk product definition. 

The brief explained that Novartis’ 

products are not currently classified as 

fluid milk products due to their 

nutritional nature, the level of nonfat 

milk solids contained in their product, 

and because their products are only 

available through foodservice and 

health care channels. The brief stressed 

that Novartis’ health care products were 

never intended to compete with 

traditional fluid milk. 

The brief predicted that Novartis’ 

products could possibly become 

reclassified as fluid milk products if a 

2.25 percent protein standard were 

adopted as a part of the definition. The 


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brief insisted that if these products are 

reclassified, it would result in higher 

costs for patients with special dietary 

and nutrition needs. The brief urged the 

Department to exempt nutritional 

products consumed for special dietary 

use from the fluid milk product 

definition if a protein standard was 

adopted as part of the fluid milk 

product definition. 

A witness appearing on behalf of 

Hormel testified in support of Proposal 

11 seeking to exclude health care 

beverages from the fluid milk product 

definition. The witness testified that 

fluid milk products designed for the 

health care industry should be 

exempted because they do not compete 

with fluid milk for sales. The witness 

explained that Hormel’s distribution is 

primarily to health care facilities, and 

they are targeted to a small segment of 

the population. The witness argued that 

if products designed for the health care 

industry were classified as fluid milk 

products, it would have no effect on 

producer revenue because the products 

have extremely limited distribution. The 

witness explained that many products 

Hormel manufactures are designed to 

help counter the effects of malnutrition 

in adults with a variety of medical 

conditions and are not marketed nor 

labeled as fluid milk. Instead, those 

products are considered to be foods for 

special dietary use, the witness noted, 

and should be exempt from the fluid 

milk product definition. 

The Bravo!, et al., witness also 

testified in support of the continued 

exemption from the fluid milk product 

definition for products such as infant 

formula, meal replacements, products 

packaged in hermetically sealed 

containers, snack replacements, high 

protein drinks, and products that 

contain alcohol or are formulated for 

animal use. The witness explained that 

meal replacements and similar products 

have historically been exempted from 

the fluid milk product definition and 

that their regulatory status should not be 

changed. 

Comments received from Bravo!, et al. 

on the Recommended Decision 

supported the continued exemption of 

meal replacements that are sold to the 

health care industry but offered a slight 

modification to clarify the intent of the 

exemption. Bravo!, et al., explained that 

some products are considered meal 

replacements and are sold both in retail 

markets and through health care 

professionals, health care institutions, 

and weight management centers. Bravo!, 

et al., asserted that a literal reading of 

the Recommended Decision could lead 

to one product holding two different 

classifications depending on how it is 

distributed. Therefore, Bravo!, et al., 

suggested that the meal replacement 

exemption be modified to read ‘‘* * * 

(meal replacement) that are intended for 

use in the health care industry, or 

products similar in form and intended 

use sold to retail customers * * *’’ 

The NMPF witness testified in 

opposition to Proposal 10 arguing that 

its adoption would eliminate important 

factors in determining if a product was 

specially formulated for a specific 

dietary purpose that would warrant 

exemption from the fluid milk product 

definition. The witness was also 

opposed to Proposal 11 because the 

proposed language—‘‘nutrient enhanced 

fortified formulas’’—was too broad and 

would not clearly distinguish such 

products from traditional fluid milk 

products. 

In its exceptions to the Recommended 

Decision, NMPF opposed any 

amendments to the exemption of meal 

replacements from the fluid milk 

product definition. NMPF stated that 

the proposed use of the ‘‘health care 

industry’’ distribution criteria was vague 

and open-ended for interpretation on 

which entities are a part of the ‘‘health 

care industry.’’ NMPF was of the 

opinion that the current packaging 

criteria contained in the proposed meal 

replacement exemption is an 

appropriate guideline for what products 

constitute meal replacements. 

The DFA/DLC witness testified in 

opposition to Proposals 10 and 11. The 

witness was of the opinion that 

amending the fluid milk product 

definition to broaden the exemption of 

products such as infant formulas and 

meal replacements was not justified 

because doing so would significantly 

lower Class I use. This position was 

reiterated in the DFA/DLC post-hearing 

brief and exceptions to the 

Recommended Decision. DFA, et al., 

argued that no evidence was presented 

to support the removal of the packaging 

criteria from the meal replacement 

exemption. The exceptions asserted that 

the use of packaging criteria has 

historically been a way to distinguish 

products that do not compete with fluid 

milk because the higher cost of 

hermetically sealed packaging 

discouraged manufacturers from using 

the exemption to circumvent Class I 

pricing. DFA, et al., also took exception 

to the proposed exemption of 

nutritional formulas that are prepared 

for the health care industry. According 

to the exceptions, the types of 

institutions that comprise the ‘‘health 

care industry’’ are not clearly defined in 

the decision. DFA, et al., asserted that 

the meal replacement exemption could 

cause manufacturers to sell their 

products to a health care facility for 

resale in the ‘‘normal marketplace’’ to 

avoid Class I pricing. 

The witness appearing on behalf of 

O–AT–KA testified that products 

packaged in hermetically-sealed 

containers or that are specialized for 

longer shelf life should remain exempt 

from fluid milk product classification 

because those products are used as meal 

replacements and meal supplements, 

not as alternatives to milk. The witness 

said that since the term ‘‘meal 

replacement’’ is not defined in the 

current definition, no change in the 

exemption of hermetically sealed 

containers should be made. The 

position was reiterated in their brief. 

The Dannon witness testified in 

opposition to the adoption of Proposal 

10 because it would remove the 6.5 

percent nonfat milk solids standard of 

the fluid milk product definition. 

Exceptions to the Recommended 

Decision filed by Fonterra opposed the 

removal of how a product is packaged 

in the infant feeding and dietary use 

exemption, and the proposed 

distribution to the ‘‘health care industry’’ 

as a method for exempting meal 

replacements. Fonterra argued that 

relying on how a product is distributed 

could cause the same product to hold 

two separate classifications. Fonterra 

offered that if meal replacements are to 

be exempt from fluid milk product 

classification, then how a product is 

distributed should not be a factor in 

determining whether or not it meets the 

fluid milk product definition. 

Discussion and Findings 

This decision provides that the fluid 

milk product definition for all Federal 

orders defines fluid milk products by: 

(1) Continuing to provide a nonexhaustive list of named fluid milk 

products; (2) Maintaining a set of 

compositional standards; and (3) 

Continuing to provide exceptions for 

products that will be exempted from the 

definition. This decision maintains the 

current maximum butterfat limit of less 

than nine percent for a product to still 

be considered a fluid milk product. The 

nonfat solids compositional standards 

will consist of the current 6.5 percent 

nonfat milk solids content of a product 

and a true milk protein standard of 2.25 

percent content of a product. The nonfat 

solids standards will be applied 

independently of each other. For 

example, if a product contained 6 

percent nonfat solids and 2.30 percent 

true milk protein and less than 9 

percent butterfat the product would be 

considered a fluid milk product. These 

standards either 6.5 percent or more 

nonfat milk solids or 2.25 percent or 


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more true milk protein, or less than nine 

percent butterfat, will be the basis for 

determining if a beverage containing 

dairy ingredients meets the 

compositional standards for being 

defined as a fluid milk product. 

The calculation of the percent true 

protein and the percent nonfat milk 

solids contained in a product will be 

performed by measuring the true protein 

and nonfat milk solids of all dairyderived ingredients contained in the 

finished product. All non-fluid dairyderived ingredients used in a fluid milk 

product will be classified and priced in 

the same manner as nonfat dry milk (or 

condensed) is currently classified and 

priced when used in a fluid milk 

product. 

The record supports exemption of 

certain drinkable products made from 

milk or products containing milkderived ingredients from the fluid milk 

product definition. These exemptions 

include: Drinkable yogurt containing at 

least 20 percent yogurt by weight and 

kefir; products especially prepared for 

infant feeding or dietary use as meal 

replacements that are packaged in 

hermetically sealed containers; and 

other products that may otherwise meet 

the compositional standards of a fluid 

milk product but contain no fluid milk 

products named in the fluid milk 

product definition. 

The primary goal of Federal milk 

marketing orders is to establish and 

maintain orderly marketing conditions. 

This is achieved primarily through the 

use of classified pricing (pricing milk 

based on its use) and the marketwide 

pooling of the proceeds of milk used in 

a marketing area among all producers. 

These two tools enable Federal orders to 

establish minimum prices that handlers 

must pay for milk based on its ultimate 

use and return to producers a weighted 

average or uniform price for their milk. 

Through classified pricing and 

marketwide pooling, Federal orders 

promote and maintain orderly 

marketing by equitably pricing milk 

used in the same class among competing 

handlers within a marketing area. This 

does not mean that handlers will 

necessarily have equal costs since 

differences in milk tests, procurement 

costs, and transportation will impact a 

handler’s final raw milk costs. However, 

it does allow handlers to have the same 

minimum regulated price for milk used 

in a particular category of products or 

class of products for which they 

compete for sales. The regulated 

minimum price is the class price for the 

respective class of use. Thus, it is 

reasonable and appropriate that milk 

used in identical or nearly identical 

products should be placed in the same 

class of use. This tends to reduce the 

incidence of disorderly marketing that 

may arise because of price differences 

between competing handlers. 

Federal milk orders classify producer 

milk as fluid milk or used to produce a 

manufactured product. Producer milk 

classified as Class I consists of those 

products that are intended to be used as 

beverages including, but not limited to, 

whole milk, skim milk, low fat milk, 

and flavored milk products such as 

chocolate milk. Producer milk classified 

as Class II includes milk used in the 

production of soft or spoonable 

manufactured products such as sour 

cream, ice cream, cottage cheese, yogurt, 

and milk that is used as ingredients in 

the manufacture of other food products. 

Producer milk classified as Class III 

includes milk used in the production of 

hard cheese products. The Class IV use 

of producer milk generally consists of 

milk used in the production of canned 

milk, dried milk products, and butter. 

Federal orders provide a definition for 

‘‘fluid milk products’’ to identify the 

types of products that are intended to be 

consumed as beverages and to specify 

that the skim milk and butterfat in these 

types of milk products should be 

classified as Class I and priced 

accordingly. The current fluid milk 

product definition contained in all 

Federal milk orders provides a nonexhaustive list of products that are 

specifically identified as fluid milk 

products. The definition also specifies 

certain compositional criteria for fluid 

milk products—any product containing 

less than 9 percent butterfat and 6.5 

percent or more nonfat milk solids. The 

definition also specifically exempts 

from the fluid milk product definition 

products especially prepared for infant 

feeding or dietary use (meal 

replacement) packaged in a 

hermetically-sealed container, any 

product that contains by weight less 

than 6.5 percent nonfat milk solids, and 

whey. 

Numerous witnesses were concerned 

that the definition of milk as defined by 

the Food and Drug Administration 

(FDA) in 21 CFR 131.110 not be 

changed. A Federal milk marketing 

order decision cannot change the 

definition of milk. Some witnesses were 

of the opinion that the addition of 

various ingredients to milk would cause 

the resulting product to not meet the 

Grade A standard. This decision does 

amend the definition of a fluid milk 

product in all milk marketing orders for 

the purpose of classifying producer milk 

in accordance with the form in which or 

the purpose for which it is used as 

required by section 608(c)(5)(A) of the 

Agricultural Marketing Agreement Act. 

Neither this decision nor Federal orders 

in general determine if milk is Grade A 

or what ingredients are allowed in milk. 

Further, Federal orders do not establish 

standards of identity for milk. Such 

standards are established by other 

agencies, such as a state board of health 

or the FDA. 

Testimony given at the hearing and 

positions taken in post-hearing briefs 

extensively discussed the importance of 

form and intended use in determining 

whether a product should be defined as 

a fluid milk product. However, 

comments to the Recommended 

Decision almost universally favored the 

use of specific compositional standards 

rather than form and use as first 

consideration which was proposed in 

the Recommended Decision. These 

comments have merit. Therefore as 

provided in this decision, compositional 

criteria will be the primary basis used 

in determining whether the product is 

defined as a fluid milk product. 

The standards of 6.5 percent or more 

nonfat milk solids or 2.25 percent or 

more true milk protein are intended to 

exclude from the fluid milk product 

definition those products which contain 

some milk solids but that are not closely 

identified with the dairy industry. 

The establishment of nonfat milk 

solids and true milk protein standards 

for classifying milk products is intended 

to provide the same classification for 

products having the same general form 

and use. Similar products in different 

classes defeat the purpose of classified 

pricing and results in unequal costs 

among handlers. It is not the intent of 

the Federal order program to bring 

products that do not resemble nor are 

marketed as dairy beverages under the 

fluid milk product definition. As stated 

earlier, the Act requires the Secretary to 

classify milk ‘‘in accordance with the 

form in which or the purpose for which 

it is used.’’ Currently, some products 

such as re-hydrating fruit flavored sport 

drinks, bottled teas, carbonated soft 

drinks, or bottled water may contain 

some milk-derived ingredients but they 

do not resemble nor are they marketed 

as dairy products. 

As discussed in the comments to the 

Recommended Decision, specific 

compositional standards will give the 

industry clearer standards from which 

to determine if a product is or will be 

defined as a fluid milk product, 

superseding reliance on form and 

intended use. When formulating new 

beverage products, the industry will 

have specific standards to guide product 

formulation. The industry will better 

know how Federal orders will 

determine the prices of milk 

ingredients. 


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Based on record evidence, 

compositional standards should 

continue to be relied upon in 

determining if a product meets the fluid 

milk product definition. The revised 

definition provides that a beverage 

should contain by weight less than 9 

percent butterfat and contain 6.5 

percent or more nonfat milk solids or 

2.25 percent or more true milk protein. 

The 9 percent butterfat criterion that is 

currently used as the maximum 

butterfat content to differentiate 

between fluid milk products and fluid 

cream products (a Class II use of milk) 

is unchanged. The addition of a 2.25 

percent true milk protein criterion 

serves to provide a sufficient basis to 

distinguish whether a product is a Class 

I or Class II use of milk. 

Several parties filed comments in 

opposition to the inclusion of the 2.25 

percent true milk protein criterion. They 

argued that its inclusion in the 

definition is unnecessary and its 

adoption may cause processors to use 

non-dairy ingredients to avoid products 

from being classified as a fluid milk 

product. 

The record of this proceeding clearly 

supports the addition of a milk protein 

standard to the fluid milk product 

definition. The record shows that by 

removing some of the lactose from milk, 

a product may be produced that is in all 

respects (except for the removed lactose) 

identical to the form and intended use 

of fluid milk products. However, using 

only the 6.5 percent nonfat standard 

results in this product being classified 

as Class II even though its form and use 

closely resembles Class I products. 

Including all dairy derived 

ingredients in the computation of a 

product’s nonfat solids and true protein 

content provides a more complete and 

comprehensive basis to determine a 

milk products identity as a fluid milk 

product. Record evidence reveals 

criticism that the current fluid milk 

product definition has not changed to 

reflect the technological advances in 

milk processing—especially the 

fractionation of milk. Such fractionation 

technology has created the ability to 

produce dairy-based beverages of almost 

any composition, some of which are 

marketed as and directly compete with 

traditional fluid milk products. 

Several witnesses at the hearing 

addressed specific composition criterion 

that should be used for determining if 

a product meets the fluid milk product 

definition. Proponents of the 2.25 

percent true milk protein criterion 

explained that with the technology to 

separate the lactose from the protein in 

milk, protein also should be used in 

determining if a product should be a 

fluid milk product because protein is 

the highest valued nonfat milk solid and 

because lactose is most often not used 

in the formulation of manufactured 

dairy-based beverages. Under current 

administrative determination of nonfat 

milk solids, a dairy-based beverage with 

lactose removed has generally been 

determined not to be a fluid milk 

product. Further, milk, in either wet or 

dry form, that has lactose removed is 

generalized as ‘‘milk protein concentrate 

(MPC)’’ and MPC has not been 

considered a nonfat milk solid. Thus, 

with lactose removed, a product closely 

resembling milk in form and intended 

use may contain less than the current 

6.5 percent nonfat milk solids even 

though the protein content could exceed 

the protein content of milk. 

Other testimony contended that milk 

protein is not a significant component 

in fluid milk products and incorporating 

a milk protein criterion is therefore not 

appropriate. Contrary to the view that 

milk protein is not a significant 

component in fluid milk products, the 

record of the proceeding reveals that in 

whole milk, protein is the third most 

abundant component following lactose 

and butterfat. In lowfat milk, protein is 

the second most abundant component. 

Even though the record and post 

hearing briefs contain considerable 

discussion concerning possible new 

product development and substitution 

of nondairy ingredients in fluid milk 

products, no evidence was presented at 

the hearing to indicate at what price 

level or to what degree such substitution 

would take place. Testimony at the 

hearing only speculated that processors 

may use nondairy ingredients if the 

fluid milk product definition adopted 

the proposed 2.25 percent true milk 

protein compositional standard. 

Opponents also suggested that evidence 

did not warrant any change to the fluid 

milk product definition and that there 

was no evidence that changing the 

definition would be beneficial to dairy 

farmers. Proponent witnesses argued 

that adoption of a 2.25 percent true milk 

protein compositional standard would 

not change the classification of products 

which currently do not meet the fluid 

milk product definition. Neither 

proponents nor opponents presented 

any data to substantiate their claims of 

benefit or harm to changing the fluid 

milk product definition. 

While the Class I use of milk is priced 

on the basis of skim milk and butterfat, 

skim milk and butterfat pricing do not 

distinguish the components or the level 

of components that are in the skim 

fraction. Even if there is a greater level 

of protein in the skim fraction, there is 

no greater value that will be assigned to 

the skim fraction. However, producers 

may benefit from products being 

determined as meeting the fluid milk 

product definition not because of the 

adoption of the protein standard but 

because the dairy ingredients in these 

products are priced as Class I. 

The record evidence supports that the 

true milk protein or nonfat milk solids 

contained in a finished product should 

be used to determine if the 2.25 percent 

true milk protein or the 6.5 percent 

nonfat solids compositional standard 

has been met. The composition of the 

finished product, including all milkderived ingredients, will provide a clear 

comparison of the product in question 

to the products listed and defined in the 

fluid milk product definition. These 

ingredients include, but are not limited 

to, the specific products listed in the 

fluid milk definition, nonfat dry milk, 

milk protein concentrate, casein, 

calcium and sodium caseinate, and 

whey. Although liquid whey, which is 

derived from other manufacturing, may 

meet the compositional standards of a 

fluid milk product in its natural form, 

it is not a finished product. The intent 

is to specifically exclude liquid whey 

from the fluid milk product definition 

and account for it only when used as an 

ingredient in the production of a 

finished product meeting the fluid milk 

product definition. The compositional 

content will be computed by using the 

pounds of true protein or nonfat milk 

solids in the finished product. For all 

other purposes, such as pricing and 

pooling, the fluid equivalent of all milk 

ingredients in fluid milk products, 

including but not limited to nonfat dry 

milk, milk protein concentrate, casein, 

calcium and sodium caseinate, and 

whey, will be used. The addition of a 

true milk protein criterion will assist in 

determining those products that should 

be considered fluid milk products. The 

inclusion of a true milk protein 

compositional standard also will assure 

that products which are comparable to 

the products listed in the fluid milk 

product definition are properly 

classified as Class I. 

Federal milk orders have consistently 

been applied to provide and this 

decision reaffirms that nonfat dry milk 

reconstituted to make a fluid milk 

product or the volume increase caused 

by the use of nonfat dry milk in the 

fortification of a fluid milk product 

should be assessed the Class I value 

because the integrity of classified 

pricing is maintained and the 

reconstituted or fortified product 

competes with fluid uses of milk 

products. Accordingly, this decision 

proposes that other dairy-derived 

ingredients, such as milk protein 


wwoods2 on DSK1DXX6B1PROD with PROPOSALS_PART 1
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concentrate, casein, calcium and 

sodium caseinate, and whey, that are 

used or reconstituted to form a fluid 

milk product or the volume increase 

caused by the use of these products to 

fortify a fluid milk product be priced as 

Class I for the same reasons. Handlers 

will be charged the current month’s 

Class I price for the additional Class I 

volume resulting from the use of these 

ingredients in fluid milk products 

contrasted to the receipt of these 

products assigned to Class IV. This 

reclassification charge (additional cost) 

is not a separate charge but is assessed 

through the increase in the handler’s 

Class I utilization and is assessed 

(determined) on the volume of 

reconstituted milk or the volume 

increase in the modified product, above 

the level of an unmodified product. This 

reclassification charge assures equity 

between competing handlers on raw 

product cost, assures producers that 

they will receive the Class I value 

contribution to a marketing order’s 

blend price for milk marketed as a fluid 

milk product, and it maintains the 

integrity of classified pricing. 

Based on the record, all milk-derived 

ingredients, on a fluid equivalent basis, 

contained in a fluid milk product will 

be included in the allocation process 

and the resulting classification and 

pricing of producer milk. Whey, as used 

herein is intended to include whey, dry 

whey, and whey protein concentrates. 

The fluid equivalent for those products 

where the relationship between the 

protein and nonfat milk solids has not 

been altered will be computed using 

nonfat solids, while the fluid equivalent 

for those products where the 

relationship between the protein and 

nonfat milk solids has been altered, 

such as MPCs, will be determined on a 

true milk protein basis. 

The methodology for computing a 

handler’s cost under Federal milk orders 

remains unchanged. Milk-derived 

products such as nonfat dry milk, MPC, 

casein, calcium and sodium caseinates 

and whey will be used to determine if 

the quantity of the fluid milk equivalent 

in the modified fluid milk product is 

greater than the volume of an 

unmodified fluid milk product of the 

same type and butterfat content. The 

equivalent volume of the modified 

product, up to the level of the volume 

of an unmodified product, will be 

considered Class I utilization and will 

result in the inherent reclassification 

charge (additional cost) in the handler’s 

use value from the Class IV price to the 

Class I price. Any fluid milk equivalent 

in excess of this equivalent volume will 

be considered a utilization of other 

source milk beginning with Class IV and 

be priced accordingly. The receipt of 

these milk-derived products used in a 

fluid milk product will be accounted for 

on a fluid equivalent basis as Class IV 

other source receipts. 

Comments filed in response to the 

Recommended Decision, by various 

parties representing producers, were in 

favor of including all nonfat dairy solids 

in the computation of the numerical 

standards as contained in the 

Recommended Decision. Their 

comments reiterated the position 

presented in their testimony and briefs. 

Comments filed by opponents of 

including all nonfat milk solids argued 

that the inclusion of all nonfat solids is 

unnecessary because whey and certain 

other nonfat solids have not 

traditionally been included in the 

definition of fluid milk. They also 

maintain that because no disorderly 

marketing has occurred, no change is 

necessary. Opponents assert that the 

inclusion of all nonfat dairy solids 

would capture additional products 

meeting the fluid milk definition and in 

turn processors would substitute 

nondairy solids to avoid classification 

as a fluid milk product. 

As record evidence supports and as 

already discussed in this decision, the 

inclusion of all milk-derived ingredients 

in the computation of the nonfat solids 

on true protein content is appropriate. 

The use of all milk-derived ingredients 

used in the manufacturing of the fluid 

milk product provides a more complete 

basis for comparing the product to the 

listed fluid milk products and a clearer 

indication of the appropriate 

determination of classification. In 

addition, considering all milk-derived 

ingredients places all current and future 

products on the same set of 

compositional standards. 

Opponents maintain that nondairy 

products will be substituted to avoid a 

product being determined to be a fluid 

milk product. However, opponents did 

not present evidence as to the relative 

prices necessary for this substitution to 

occur. Opponents did not quantify any 

of their claims that the recommended 

decision would cause product 

substitution in the manufacture of dairy 

based beverages. Nor did they present 

any examples of dairy ingredient 

substitution. Therefore, it is virtually 

impossible to determine if substitution 

will occur and what the impact, if any, 

may be. While there are currently 

several nondairy ingredient options 

available to formulate products, the 

advantages of using dairy ingredients, 

such as their nutrition, physical 

properties, and taste, have kept dairy 

ingredients as a competitive choice for 

use in the manufacture of the many new 

products currently available. 

Manufacturers of milk-based products 

that are intended to be used for dietary 

uses (meal replacements) testified that 

products sold for such dietary use in 

hermetically-sealed containers and the 

same product sold in other types of 

containers receive different regulatory 

classifications. Some products, such as 

those intended to be used for infant 

feeding and dietary needs (meal 

replacements), are currently considered 

Class II products if they are 

hermetically-sealed. However, the same 

products in a brick-pack or other types 

of packaging may be considered fluid 

milk products. The record evidence 

indicates that these products have a 

limited distribution and in the case of 

many of the dietary products, sales are 

only to health care facilities (such as 

hospitals and nursing homes). In 

addition, these products have a very 

long shelf life. The limited distribution 

and packaging of these products 

indicates that they do not directly 

compete with Class I products. Their 

intended use can be generalized as 

replacements for meals by infants, the 

infirm, and the elderly and not for use 

as a beverage. These products as used 

for medical and well-defined healthcare 

applications are not fluid milk 

competitors and are not of a scale, as 

record evidence demonstrates, that 

would cause a change in marketing 

conditions for fluid milk products. 

Accordingly, the term ‘‘meal 

replacement’’ encompasses both those 

drinkable dairy products intended to 

replace meals and categorized products 

intended for the health care industry, 

and may include other products of 

similar intended form and use. 

This decision, in the narrow context 

of a highly specialized and marketed 

drinkable product sold to the health 

care industry, continues to find that 

packaging is a legitimate criterion for 

considering some meal replacement 

products as Class II products and others 

as Class I. When dietary products (meal 

replacements) are in hermetically sealed 

containers such packaging confirms that 

their intended use is a meal 

replacement. When not so packaged, 

dietary products (meal replacements) 

may or may not be used to replace the 

nutrition of normal meals in the health 

care industry or possibly to be used in 

the same manner as fluid milk. The 

dietary products packaged in other than 

hermetically sealed containers may or 

may not have the same form and 

intended use as those in hermetically 

sealed containers. It is therefore not 

reasonable that they should 

automatically be similarly classified. 


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Dietary products (meal replacements) 

should be excluded from the fluid milk 

product definition and should be 

considered Class II products if they are 

packaged in hermetically sealed 

containers or if it is demonstrated 

otherwise that the intended use is for 

specialized health care purposes or 

medically required meal substitution. 

Based on the record, the products in 

question have been produced to help 

consumers with various dietary or 

digestive problems achieve sufficient 

nutritional intake through a drinkable 

alternative to solid foods. These 

products traditionally have added 

vitamins, minerals, and proteins to 

achieve a nutritional equivalent to a 

‘‘typical’’ meal. In addition, these 

products are packaged in hermetically 

sealed containers to maintain a long 

shelf life for easy handling in nursing 

homes and hospitals. These products 

continue to be Class II products. Similar 

meal replacement products not 

packaged in hermetically sealed 

containers (brick packs or gable topped 

containers) should be considered as 

Class II products regardless of where 

they are marketed if they can be shown 

to be intended for the same specialized 

dietary use as a product sold in a 

hermetically sealed container with the 

same limited use. However, fortified 

milk products not intended for dietary 

use (meal replacements) that are 

available for a more generalized use that 

would broadly compete with fluid milk 

will not be exempted from the fluid 

milk product definition. 

Numerous comments and exceptions 

were filed in response to the 

Recommended Decision that are in 

opposition to the elimination of 

packaging and the addition of ‘‘sold to 

the health care industry’’ as criteria for 

excluding milk based dietary use (meal 

replacement) products from the 

definition of a fluid milk product. Much 

of the opposition concerned the 

definition of ‘‘sold to the health care 

industry’’ and the application of such a 

criteria. Several comments suggested 

that products sold to retail stores might 

be classified differently than products 

sold to nursing homes or hospitals. 

Based on the evidence presented in 

exceptions, this decision removes the 

distribution channel reference in the 

fluid milk product definition to prevent 

the potential dual classification of a 

product. 

As noted by DFA, et al., in its 

exceptions to the Recommended 

Decision, USDA did not receive any 

proposals to change the classification of 

supplements for dietary use that contain 

milk-derived ingredients such as readyto-drink high protein products. 

Beverages containing milk-derived 

ingredients, such as high protein drinks, 

are typically packaged in hermetically 

sealed containers and are currently 

classified as Class II products. Such 

beverages may include fruit flavored rehydrating sports drinks, bottled teas, 

carbonated soft drinks and bottled 

waters which may contain milk-derived 

ingredients, usually in the form of whey 

proteins. Because this final decision 

provides for primary reliance on 

compositional standards rather than on 

intended form and use, products such as 

these need to be specifically exempted 

from the fluid milk product definition 

even if they otherwise meet the 

definition’s compositional standards. 

Such products are clearly not the same 

as other named fluid milk products of 

the definition and are not used in a 

manner consistent with beverage milk. 

These products may often be used to 

supplement nutritional needs, but are 

not used or considered to be a meal 

replacement. Such products, packaged 

in hermetically sealed containers, will 

be exempted from the fluid milk 

product definition. 

Exceptions to the Recommended 

Decision assert that expanding 

exemptions of products from the fluid 

milk product definition would result in 

lower producer revenue. The record of 

this proceeding lacks the data to 

conclude that exempting certain milkbased or milk containing products, or 

reclassifying current products from one 

class to another, will harm producer 

revenue. 

Proposal 5 called for, in part, 

retaining the 6.5 percent nonfat solids 

criterion and giving the Department the 

flexibility to include other dairy-based 

products that fell below 6.5 percent 

nonfat solids as fluid milk products. At 

the hearing, the proposal was modified 

to require the Department to first make 

other determinations and to conduct 

studies before a classification 

determination is made on whether the 

product meets the fluid milk product 

definition. 

Specifically, the modified proposal 

would require the Department to 

determine if a product competes 

directly and substantially with Food 

and Drug Administration defined milk 

products and also included five other 

criteria the Department would have to 

satisfy before a written determination of 

fluid milk product classification could 

be issued. The modified proposal 

further required that more than three 

million pounds of the product be sold 

in a marketing area per month before the 

product would be defined as a fluid 

milk product even if the product met all 

of the five criteria. 

The multi-criteria features of Proposal 

5, as modified, are not consistent with 

the adopted primary consideration to 

compositional standards and the 

requirement to classify milk on the basis 

of form and intended use as provided 

for in section 608(c)(5)(A) of the Act and 

are not adopted. Requiring a comparison 

of retail prices and advertising, and 

examination of the substitutability 

between the new product and already 

defined fluid milk products does not 

conform to the primary reliance on 

compositional standards or form and 

intended use in determining whether a 

product meets the fluid milk product 

definition. No significant improvements 

to product classification determinations 

would be achieved. Therefore Proposal 

5 is denied. 

A modification to Proposal 7 made at 

the hearing is not adopted. This 

modification sought to require the 

Department to hold a hearing to 

determine the classification of a new 

product ‘‘made by new technology.’’ 

Such requirement is not necessary for 

the same reasons in determining that 

Proposal 5 and all of its modifications 

are not adopted. The need to 

incorporate a specific requirement to 

hold a hearing is not necessary since it 

is already available. 

A number of opponents of proposals 

seeking to change the fluid milk product 

definition argued that there must 

necessarily exist a current problem or 

the existence of disorderly marketing 

conditions before amendments to the 

provisions of Federal milk marketing 

orders can be made. Based on the 

evidence, this decision disagrees with 

such arguments. Actions to preserve the 

integrity of the regulatory system have 

historically been taken to avoid 

problems with the goal of maintaining 

orderly marketing conditions. 

Amending the orders to prevent 

disorderly marketing conditions from 

arising is reasonable and consistent with 

ensuring and maintaining orderly 

conditions and equity among producers 

and handlers. In light of the changing 

marketing conditions, it is especially 

reasonable and appropriate to provide 

standards that can address both 

immediate and future needs of a rapidly 

changing industry brought about by new 

technology. 

Some witnesses testified that even if 

a product meets the fluid milk product 

definition, the intended use of that 

product should be considered for 

assigning the product to the most 

appropriate class use. In this regard, if 

the intended use of the product is a food 

item that does not compete with 

traditional fluid milk in the 

marketplace, the product should be 


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exempted from the fluid milk product 

definition. The most notable products of 

this characteristic are drinkable yogurts 

that, while drinkable, are not intended 

to be used as a beverage. The record 

reveals that some products such as 

drinkable yogurts are marketed as a food 

item to supplement or even replace a 

meal and intended to be used as a quick 

and easy way to carry a snack. This 

differentiates their intended use from 

fluid milk products consumed as 

beverages. The record indicates that 

these products are not marketed side-byside with fluid milk products in retail 

outlets. Instead, they are positioned 

alongside other Class II products such as 

spoonable yogurts in cups. It is 

reasonable to conclude that drinkable 

yogurts are yogurt in fluid form and not 

flavored drinks and are sufficiently 

different in intended use from other 

fluid milk products to warrant their 

exemption from the fluid milk product 

definition. 

A portion of Proposal 9 referred to 

drinkable yogurt having a protein 

standard of ‘‘* * * no more than 2.2 

percent skim milk protein * * *’’ given 

that it contained a minimum amount (20 

percent) of yogurt. As just discussed 

above, several witnesses testified to the 

fact, and the consumer surveys and 

marketplace data provided by Dannon 

and General Mills explained how yogurt 

containing products (e.g. drinkable 

yogurt) are fundamentally different from 

fluid milk. No protein standard is 

adopted for drinkable yogurt because 

the 20 percent yogurt content 

requirement differentiates these 

products and assures they are not in 

competition with fluid milk. 

Nevertheless, it is reasonable to 

establish a minimum level of yogurt that 

needs to be contained in the finished 

product to differentiate them from 

flavored beverages while at the same 

time identifying the drinkable yogurt as 

a yogurt product. No record evidence 

was presented by manufacturers of 

yogurt-containing beverages to 

demonstrate that a 20 percent minimum 

yogurt standard would cause some 

yogurt beverages to be classified as fluid 

milk products and others not. Therefore 

based on record evidence, it is 

reasonable to estimate that the current 

yogurt content of these products is 

above the proposed 20 percent 

minimum. 

Accordingly, drinkable yogurt 

containing at least 20 percent yogurt by 

weight should be considered a yogurt 

product and as such exempt from the 

fluid milk product definition. The 

yogurt contained in exempted drinkable 

yogurt still must meet the yogurt, lowfat yogurt, or fat-free yogurt standard of 

identity as defined by the FDA (21 CFR 

131.200–131.206) and the manufacture 

of the yogurt mass must be an 

identifiable and quantifiable step in the 

formulation process of the drinkable 

yogurt. 

Opponents of excluding drinkable 

yogurts from the fluid milk product 

definition stressed that drinkable 

yogurts should not be excluded because 

they are beverages and packaged 

similarly to other fluid milk products. 

Opponents are of the opinion that 

drinkable yogurts are fluid milk 

products because they are comparable to 

flavored or cultured fluid milk products. 

Drinkable yogurts do have several 

characteristics similar to listed fluid 

milk products—they can be used as a 

beverage and are similarly packaged. 

There are, however, other characteristics 

that differentiate drinkable yogurts from 

fluid milk products, as the record 

indicates. These characteristics include, 

in most cases, a different consistency 

than the fluid milk products, a 

significant volume of added yogurt, the 

addition of fruit and not just flavorings, 

and live and active cultures supplied by 

the yogurt. 

The differences between listed fluid 

milk products and drinkable yogurts 

warrant the exclusion of drinkable 

yogurts containing at least 20 percent 

yogurt from being defined as a fluid 

milk product. Drinkable products with 

less than 20 percent yogurt will be 

considered fluid milk products. The 

milk ingredients (including the yogurt 

portion) contained in those products 

with less than 20 percent yogurt will be 

priced at the Class I price. The 

Recommended Decision proposed the 

yogurt portion of these Class I products 

not be subject to a Class I ‘‘upcharge.’’ 

Fonterra’s exceptions objected to the 

yogurt content not being priced as Class 

I as would other milk ingredients in the 

fluid milk product. Since these 

beverages with less than 20 percent 

yogurt will be considered a fluid milk 

product, it is consistent to price the 

milk ingredients in such products the 

same as other Class I beverages. 

Bravo!, et al., which supported 

excluding drinkable yogurts from the 

fluid milk product definition, proposed, 

as did Lifeway Foods separately at the 

hearing, to also exclude kefir. The 

evidence provided to support excluding 

kefir from the fluid milk product 

definition identified kefir as a cultured 

product similar to drinkable yogurt that, 

like yogurt, contains live and active 

cultures. While cultured beverages are 

one of the listed products in the fluid 

milk product definition, the record 

shows kefir’s several similarities to 

drinkable yogurts provide a reasonable 

basis to conclude that the milk used in 

kefir products should be classified in 

the same way as milk used in drinkable 

yogurt products. NMPF argued that kefir 

should not be exempt because no 

standard of identity exists to identify 

what is and is not kefir. While kefir has 

no standard of identity, cultured milk 

requirements are described by the U.S. 

Food and Drug Administration (FDA) 

(21 CFR 131.112) and kefir is 

specifically listed as such a product. 

Therefore, as with drinkable yogurts 

containing at least 20 percent yogurt by 

weight, kefir should be exempt from the 

fluid milk product definition. 

Producer groups were concerned 

about the Recommended Decision’s 

effect on producer income. The 

exclusion of certain drinkable yogurts 

and kefir from the fluid milk product 

definition will have a minimal impact 

on the resulting uniform prices to 

producers. According to the record the 

volume of drinkable yogurt or kefir type 

beverages was less than one-half of one 

percent of the packaged fluid milk 

products distributed in 2004. For 2004, 

it is estimated that if all of the current 

drinkable yogurt and kefir beverages 

had been Class II, the impact on 

producers, either through the uniform 

price or producer price differential, 

would have been a $0.0026 per 

hundredweight reduction on the more 

than 103 billion pounds of producer 

milk pooled on Federal orders. 

NMPF argued that the form and use 

of drinkable yogurt is the same as the 

products listed in the fluid milk 

products definition. It could be asserted 

that drinkable yogurt is a beverage 

similar to some of the listed fluid milk 

products and it is made in this form 

with the intention of people drinking 

the product. However, the similarity 

ends there and the record evidence 

establishes numerous differences which 

support drinkable yogurt and kefir to 

not be treated as fluid milk products. As 

pointed out in the Recommended 

Decision and by proponents of both 

Proposals 8 and 9 in their comments, 

drinkable yogurt is marketed with 

yogurt and competes with yogurt 

products in the marketplace and not 

with fluid milk products. As indicated 

by a proponent for exempting drinkable 

yogurt from the fluid milk product 

definition, it is made by blending yogurt 

into a liquid. This is significantly 

different from flavored drinks in which 

flavoring is added to a fluid milk 

product. As a practical point, drinkable 

yogurts do not fulfill the same intended 

use as fluid milk products in the home 

or commercially. For example, they are 

not intended to be added to tea or 

coffee, or poured on cereals, fruits and 


wwoods2 on DSK1DXX6B1PROD with PROPOSALS_PART 1
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other foods, and to be consumed as a 

beverage. 

NMPF, in their exceptions to the 

Recommended Decision, pointed out 

that the FDA may change the standard 

of identity of yogurt and therefore it is 

inappropriate to use the current FDA 

standard of identity as a criterion in 

determining that drinkable yogurt 

which contains more than 20 percent 

yogurt is not a fluid milk product. 

NMPF exceptions also opposed the 

exemption of kefir from the fluid milk 

product definition for many of the same 

reasons for exempting drinkable yogurt. 

As NMPF correctly notes, kefir is a 

cultured fermented beverage. A cultured 

fermented beverage such as kefir is 

equally dissimilar to the other listed 

fluid milk products as these described 

drinkable yogurts. 

After careful review and 

consideration of the record evidence 

and the reasons as stated above, this 

decision concludes that drinkable 

yogurt containing at least 20 percent 

yogurt by weight, and kefir should not 

be defined as fluid milk products. As 

such, this determination represents the 

adoption of Proposal 8, the requirement 

that drinkable yogurt products contain 

at least 20 percent yogurt by weight to 

be excluded from the fluid milk product 

definition as included in Proposal 9, 

and the proposal of Bravo!, et al., as 

well as Lifeway Foods that kefir be 

exempt from the fluid milk product 

definition. Milk used to produce these 

products will be classified as a Class II 

use of milk. 

Rulings on Proposed Findings and 

Conclusions 

Briefs, proposed findings and 

conclusions were filed on behalf of 

certain interested parties. These briefs, 

proposed findings and conclusions, and 

the evidence in the record were 

considered in making the findings and 

conclusions set forth above. To the 

extent that the suggested findings and 

conclusions filed by interested parties 

are inconsistent with the findings and 

conclusions set forth herein, the 

requests to make such findings or reach 

such conclusions are denied for the 

reasons previously stated in this 

decision. 

General Findings 

The findings and determinations 

hereinafter set forth supplement those 

that were made when the Northeast and 

other marketing 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. 

(a) The tentative marketing 

agreements and the orders, as hereby 

proposed to be amended, and all of the 

terms and conditions thereof, will tend 

to effectuate the declared policy of the 

Act; 

(b) 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 marketing areas, and the 

minimum prices specified in the 

tentative marketing agreements and the 

orders, as hereby proposed to be 

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; 

(c) The tentative marketing 

agreements and the orders, as hereby 

proposed to be amended, will regulate 

the handling of milk in the same 

manner as, and will be applicable only 

to persons in the respective classes of 

industrial and commercial activity 

specified in, marketing agreements upon 

which a hearing has been held; and 

(d) All milk and milk products 

handled by handlers, as defined in the 

tentative marketing agreements and the 

orders as hereby proposed to be 

amended, are in the current of interstate 

commerce or directly burden, obstruct, 

or affect interstate commerce in milk or 

its products. 

Rulings on Exceptions 

In arriving at the findings and 

conclusions, and the regulatory 

provisions of this decision, each of the 

exceptions received was carefully and 

fully considered in conjunction with the 

record evidence. To the extent that the 

findings and conclusions and the 

regulatory provisions of this decision 

are at variance with any of the 

exceptions, such exceptions are hereby 

overruled for the reasons previously 

stated in this decision. 

Marketing Agreement and Order 

Annexed hereto and made a part 

hereof are two documents: A Marketing 

Agreement regulating the handling of 

milk, and an Order amending the orders 

regulating the handling of milk in the 

Northeast and other marketing areas, 

which has been decided upon as the 

detailed and appropriate means of 

effectuating the foregoing conclusions. 

It is hereby ordered that this entire 

decision and the two documents 

annexed hereto be published in the 

Federal Register. 

Referendum Order To Determine 

Producer Approval; Determination of 

Representative Period; and Designation 

of Referendum Agent 

It is hereby directed that a referenda 

be conducted and completed on or 

before the 30th day from the date this 

decision is published in the Federal 

Register, in accordance with the 

procedures for the conduct of referenda 

[7 CFR 900.300–311], to determine 

whether the issuance of the orders as 

amended and hereby proposed to be 

amended, regulating the handling of 

milk in the Northeast, Appalachian, 

Florida, Southeast, Upper Midwest, 

Central, Mideast, Pacific Northwest, 

Southwest and Arizona marketing areas 

is approved or favored by producers, as 

defined under the terms of the order, as 

amended and as hereby proposed to be 

amended, who during such 

representative period were engaged in 

the production of milk for sale within 

the aforesaid marketing areas. 

The representative period for the 

conduct of such referenda is hereby 

determined to be June 2009. 

The agents of the Secretary of 

Agriculture to conduct such referenda 

are hereby designated to be the 

respective market administrators of the 

aforesaid orders. 

List of Subjects in 7 CFR Part 1000 

Milk marketing orders. 

Order Amending the Orders Regulating 

the Handling of Milk in the Northeast 

and Other Marketing Areas 

This order shall not become effective 

until the requirements of § 900.14 of the 

rules of practice and procedure 

governing proceedings to formulate 

marketing agreements and marketing 

orders have been met. 

Findings and Determinations 

The findings and determinations 

hereinafter set forth supplement those 

that were made when the 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. 

(a) Findings. 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 Northeast 

and other 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 (7 CFR part 900). 


wwoods2 on DSK1DXX6B1PROD with PROPOSALS_PART 1
33552 Federal Register / Vol. 75, No. 113 / Monday, June 14, 2010 / Proposed Rules 

1First and last section of order. 

2Name of order. 

3Appropriate part number. 

4Next consecutive section number. 

5Appropriate representative period for the order. 

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; 

(3) The said orders as hereby 

amended regulate the handling of milk 

in the same manner as, and are 

applicable only to persons in the 

respective classes of industrial or 

commercial activity specified in, a 

marketing agreement upon which a 

hearing has been held; and 

(4) All milk and milk products 

handled by handlers, as defined in the 

marketing agreements and the orders as 

hereby amended, are in the current of 

interstate commerce in milk or its 

products. 

Order Relative to Handling 

It is therefore ordered, that on and 

after the effective date hereof, the 

handling of milk in the Northeast and 

other marketing areas shall be in 

conformity to and in compliance with 

the terms and conditions of the order, as 

amended, and as hereby amended, as 

follows: 

For the reasons set forth in the 

preamble, 7 CFR part 1000 is proposed 

to be amended as follows: 

PART 1000—GENERAL PROVISIONS 

OF FEDERAL MILK MARKETING 

ORDERS 

1. The authority citation for 7 CFR 

Part 1000 continues to read as follows: 

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

2. In § 1000.15 paragraphs (a) and 

(b)(1) are revised to read as follows: 

§ 1000.15 Fluid milk product. 

(a) Except as provided in paragraph 

(b) of this section, fluid milk product 

shall mean any milk products in fluid 

or frozen form that are intended to be 

used as beverages containing less than 

9 percent butterfat and 6.5 percent or 

more nonfat solids or 2.25 percent or 

more true milk protein. Sources of such 

nonfat solids/protein include but are not 

limited to: Casein, whey protein 

concentrate, milk protein concentrate, 

dry whey, caseinates, lactose, and any 

similar dairy derived ingredient. Such 

products include, but are not limited to: 

Milk, fat-free milk, lowfat milk, light 

milk, reduced fat milk, milk drinks, 

eggnog and cultured buttermilk, 

including any such beverage products 

that are flavored, cultured, modified 

with added or reduced nonfat solids, 

sterilized, concentrated, or 

reconstituted. As used in this part, the 

term concentrated milk means milk that 

contains not less than 25.5 percent, and 

not more than 50 percent, total milk 

solids. 

(b) * * * 

(1) Any product that contains less 

than 6.5 percent nonfat milk solids or 

contains less than 2.25 percent true milk 

protein; whey; plain or sweetened 

evaporated milk/skim milk; sweetened 

condensed milk/skim milk; yogurt 

containing beverages with 20 or more 

percent yogurt by weight and kefir; 

products especially prepared for infant 

feeding or dietary use (meal 

replacement) that are packaged in 

hermetically sealed containers; and 

products that meet the compositional 

standards specified in paragraph (a) of 

this section but contain no fluid milk 

products included in paragraph (a) of 

this section. 

* * * * * 

3. In § 1000.40 paragraphs (b)(2)(iii) 

and (b)(2)(vi) are revised to read as 

follows: 

§ 1000.40 Classes of utilization. 

* * * * * 

(b) * * * 

(2) * * * 

(iii) Aerated cream, frozen cream, sour 

cream, sour half-and-half, sour cream 

mixtures containing nonmilk items; 

yogurt, including yogurt containing 

beverages with 20 percent or more 

yogurt by weight and kefir, and any 

other semi-solid product resembling a 

Class II product; 

* * * * * 

(vi) Products especially prepared for 

infant feeding or dietary use (meal 

replacements) that are packaged in 

hermetically sealed containers and 

products that meet the compositional 

standards of § 1000.15(a) but contain no 

fluid milk products included in 

§ 1000.15(a); 

* * * * * 

4. In § 1000.43 paragraph (c) is revised 

to read as follows: 

§ 1000.43 General classification rules. 

* * * * * 

(c) If any of the water but none of the 

nonfat solids contained in the milk from 

which a product is made is removed 

before the product is utilized or 

disposed of by the handler, the pounds 

of skim milk in such product that are to 

be considered under this part as used or 

disposed of by the handler shall be an 

amount equivalent to the nonfat milk 

solids contained in such product plus 

all of the water originally associated 

with such solids. If any of the nonfat 

solids contained in the milk from which 

a product is made are removed before 

the product is utilized or disposed of by 

the handler, the pounds of skim milk in 

such product that are to be considered 

under this part as used or disposed of 

by the handler shall be an amount 

equivalent to the nonfat milk solids 

contained in such product plus all of 

the water and nonfat solids originally 

associated with such solids determined 

on a protein equivalent basis. 

* * * * * 

Note: The following will not appear in the 

Code of Federal Regulations. 

Marketing Agreement Regulating the 

Handling of Milk in Certain Marketing 

Areas 

The parties hereto, in order to 

effectuate the declared policy of the Act, 

and in accordance with the rules of 

practice and procedure effective 

thereunder (7 CFR part 900), desire to 

enter into this marketing agreement and 

do hereby agree that the provisions 

referred to in paragraph I hereof, as 

augmented by the provisions specified 

in paragraph II hereof, shall be and are 

the provisions of this marketing 

agreement as if set out in full herein. 

I. The findings and determinations, 

order relative to handling, and the 

provisions of §lll to lll1 all 

inclusive, of the order regulating the 

handling of milk in the llllll2

marketing area (7 CFR part lll3); 

and 

II. The following provisions: 

§llllll4 Record of milk handled 

and authorization to correct 

typographical errors. 

(a) Record of milk handled. The 

undersigned certifies that he/she 

handled during the month of 

lllll5, lllll hundredweight 

of milk covered by this marketing 

agreement. 

(b) Authorization to correct 

typographical errors. The undersigned 

hereby authorizes the Deputy 

Administrator, or Acting Deputy 


wwoods2 on DSK1DXX6B1PROD with PROPOSALS_PART 1
Federal Register / Vol. 75, No. 113 / Monday, June 14, 2010 / Proposed Rules 33553 

Administrator, Dairy Programs, 

Agricultural Marketing Service, to 

correct any typographical errors which 

may have been made in this marketing 

agreement. 

Effective date. This marketing 

agreement shall become effective upon 

the execution of a counterpart hereof by 

the Department in accordance with 

Section 900.14(a) of the aforesaid rules 

of practice and procedure. 

In Witness Whereof, The contracting 

handlers, acting under the provisions of 

the Act, for the purposes and subject to 

the limitations herein contained and not 

otherwise, have hereunto set their 

respective hands and seals. 

Signature 

By (Name) lllllllllllll

(Title) lllllllllllllll

(Address) lllllllllllll

(Seal) 

Attest lllllllllllllll

Dated: May 21, 2010. 

Rayne Pegg, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. 2010–12771 Filed 6–11–10; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 23 

[Docket No. CE307; Notice No. 23–10–01– 

SC] 

Special Conditions: AeroMech, 

Incorporated; Hawker Beechcraft 

Corporation, Model B200 and Other 

Aircraft Listed in Table 1, Approved 

Model List (AML); Installation of MD835 

Lithium Ion Battery 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed special 

conditions. 

SUMMARY: This action proposes special 

conditions for the AeroMech, 

Incorporated; Hawker Beechcraft 

Corporation, model B200 and other part 

23 aircraft listed on the AML. These 

airplanes as modified by AeroMech, 

Incorporated will have a novel or 

unusual design feature(s) associated 

with installation of the Mid-Continent 

Instruments MD835 Lithium Ion (Li-ion) 

battery. The applicable airworthiness 

regulations do not contain adequate or 

appropriate safety standards for this 

design feature. These proposed special 

conditions contain the additional safety 

standards that the Administrator 

considers necessary to establish a level 

of safety equivalent to that established 

by the existing airworthiness standards. 

DATES: We must receive your comments 

by July 14, 2010. 

ADDRESSES: Mail two copies of your 

comments to: Federal Aviation 

Administration, Regional Counsel, 

ACE–7, 901 Locust, Room 506, Kansas 

City, Missouri 64106. You may deliver 

two copies to the Small Airplane 

Directorate at the above address. Mark 

your comments: Docket No. CE307. You 

may inspect comments in the Rules 

Docket weekdays, except Federal 

holidays, between 7:30 a.m. and 4 p.m. 

FOR FURTHER INFORMATION CONTACT: 

James Brady, Regulations and Policy 

Branch, ACE–111, Federal Aviation 

Administration, Small Airplane 

Directorate, Aircraft Certification 

Service, 901 Locust, Kansas City, MO 

64106; telephone (816) 329–4132; 

facsimile (816) 329–4090. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

We invite interested persons to 

submit written data, views, or 

arguments as they desire. The most 

helpful comments reference a specific 

portion of the special conditions, 

explain the reason for any 

recommended change, and include 

supporting data. We ask that you send 

us two copies of written comments. 

We will file in the docket all 

comments we receive, as well as a 

report summarizing each substantive 

public contact with FAA personnel 

concerning these special conditions. 

You may inspect the docket before and 

after the comment closing date. If you 

wish to review the docket in person, go 

to the address in the ADDRESSES section 

of this preamble between 7:30 a.m. and 

4 p.m., Monday through Friday, except 

Federal holidays. 

We will consider all comments we 

receive on or before the closing date for 

comments. We will consider comments 

filed late if it is possible to do so 

without incurring expense or delay. We 

may change these special conditions 

based on the comments we receive. 

If you want the FAA to acknowledge 

receipt of your comments on this 

proposal, include with your comments 

a pre-addressed, stamped postcard on 

which the docket number appears. We 

will stamp the date on the postcard and 

mail it back to you. 

Background 

On September 18, 2009, AeroMech, 

Incorporated applied for a supplemental 

type certificate AML for installation of 

the Mid-Continent Instruments MD835 

Li-ion battery in the Hawker Beechcraft 

Corporation, B200 and other aircraft 

listed on the AML. The AML covers part 

23 aircraft that currently use the PS–835 

lead-acid emergency battery. 

The current regulatory requirements 

for part 23 airplanes do not contain 

adequate requirements for the 

application of Li-ion batteries in 

airborne applications. AeroMech, 

Incorporated proposes to replace an 

existing L–3 Communications PS–835 

lead-acid emergency battery with a MidContinent Instruments MD835 Li-ion 

battery on part 23 aircraft currently 

equipped with the PS–835 battery. This 

type of battery possesses certain failure, 

operational, and maintenance 

characteristics that differ significantly 

from that of the nickel cadmium (Ni-Cd) 

and lead-acid rechargeable batteries 

currently approved in other normal, 

utility, acrobatic, and commuter 

category airplanes. 

Type Certification Basis 

Under the provisions of § 21.101, 

AeroMech, Incorporated must show that 

the Hawker Beechcraft Corporation 

B200 and other aircraft listed on the 

AML continue to meet the applicable 

provisions of the regulations 

incorporated by reference in the type 

certificate of each model listed and the 

applicable regulations in effect on the 

date of application for the change. The 

regulations incorporated by reference in 

the type certificate are commonly 

referred to as the ‘‘original type 

certification basis.’’ The certification 

basis for each model qualified for this 

modification is detailed below. 

TABLE 1—APPROVED MODEL LIST

Aircraft make Aircraft model TCDS Certification basis for alteration 

Aero Vodochody .......... Ae 270 ............................................................. A58CE Rev 3 ............. 14 CFR part 23 amdt 23–59, except for 14 

CFR 23.1308. 

Cessna ........................ 441 .................................................................. A28CE ........................ 14 CFR part 23 amdt 23–59, except for 14 

CFR 23.1308. 


wwoods2 on DSK1DXX6B1PROD with PROPOSALS_PART 1