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[Federal Register Volume 75, Number 175 (Friday, September 10, 2010)]
[Proposed Rules]
[Pages 55292-55295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22643]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1250

[Doc. No. AMS-PY-08-0032]

Amendment to Egg Research and Promotion Order and Regulations To 
Increase the Rate of Assessment and Referendum Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and notice of referendum.

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SUMMARY: This proposed rule would amend the Egg Research and Promotion 
Order (Order) to increase the assessment rate on egg producers paying 
assessments to the American Egg Board (AEB) from 10 cents to 15 cents 
per 30-dozen case of commercial eggs, provided the increase is approved 
by egg producers voting in a referendum. This proposal would also make 
a conforming amendment to the regulations. Notice also is hereby given 
that the Agricultural Marketing Service (AMS) will conduct a referendum 
to determine whether egg producers favor the increase in the assessment 
rate.

DATES: For the purpose of determining voter eligibility, the 
representative production period is the period January 1, 2009, through 
December 31, 2009. The referendum will be held during the period 
October 29 through November 19, 2010.

FOR FURTHER INFORMATION CONTACT: Angela C. Snyder, Research and 
Promotion; Standards, Promotion & Technology Branch; Poultry Programs, 
AMS, USDA, 1400 Independence Avenue, SW., Room 3932-S, Washington, DC 
20250-0256; telephone: (202) 720-4476; fax: (202) 720-2930; or e-mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The Office of Management and Budget (OMB) has waived the review 
process required by Executive Order 12866 for this action.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The rule is not intended to have a retroactive 
effect.
    The Egg Research and Consumer Information Act (Act) provides that 
administrative proceedings must be exhausted before parties may file 
suit in court. Section 14 of the Act allows those subject to the Order 
to file a written petition with the Secretary of Agriculture 
(Secretary) if they believe that the Order, any provision of the Order, 
or any obligation imposed in connection with the Order, is not in 
accordance with the law. In any petition, the person may request a 
modification of the Order or an exemption from the Order. The 
petitioner will have the opportunity for a hearing on the petition. 
Afterwards, an Administrative Law Judge (ALJ) will issue a decision. If 
the petitioner disagrees with the ALJ's ruling, the petitioner has 30 
days to appeal to the Judicial Officer, who will issue a ruling on 
behalf of the Secretary. If the petitioner disagrees with the 
Secretary's ruling, the petitioner may file, within 20 days, an appeal 
in the U.S. District Court for the district where the petitioner 
resides or conducts business.

Initial Regulatory Flexibility Act Analysis and Paperwork Reduction Act

    In accordance with the Regulatory Flexibility Act (RFA) [5 U.S.C. 
601-612], AMS has considered the economic impact of this action on the 
small producers that would be affected by this rule. The purpose of the 
RFA is to fit regulatory action to scale on businesses subject to such 
action so that small businesses will not be disproportionately 
burdened.
    According to AEB, approximately 245 producers are subject to the 
provisions of the Order, including paying assessments. Under the 
current Order, producers in the 48 contiguous United States and the 
District of Columbia who own more than 75,000 laying hens each 
currently pay a mandatory assessment of 10 cents per 30-dozen case of 
eggs. Handlers are responsible for collecting and remitting assessments 
to AEB. There are approximately 160 egg handlers who collect 
assessments. Assessments under the program are used by AEB to finance 
promotion, research, and consumer information programs designed to 
increase consumer demand for eggs in domestic and international 
markets. At the current rate of 10 cents per 30-dozen case, assessments 
generate about $20 million in annual revenues. The Order is 
administered by AEB under supervision of the U.S. Department of 
Agriculture.
    In 13 CFR part 121, the Small Business Administration (SBA) defines 
small agricultural producers as those having annual receipts of no more 
than $750,000 and small agricultural service firms as those having 
annual receipts of no more than $7 million. Under this definition, the 
vast majority of the egg producers that would be affected by this rule 
would not be considered small

[[Page 55293]]

entities. Producers owning 75,000 or fewer laying hens are eligible to 
be exempt from this program.
    Given that a laying hen produces approximately 22 dozen eggs per 
year, production from 75,000 laying hens would result in 1.65 million 
dozen eggs. With a farm-gate price of $0.837 per dozen, total annual 
receipts would be $1.83 million, which is well above the definition 
used to describe a small farm. The wholesale price of eggs would have 
to be approximately $0.45 per dozen before a producer with 75,000 hens 
could be classified as a small farm under the SBA definition.
    The present 10-cent assessment is equivalent to approximately 0.28 
percent of the wholesale price of a 30-dozen case of large eggs. An 
assessment rate of 15 cents per 30-dozen case would be equivalent to 
approximately 0.42 percent of the wholesale price of a 30-dozen case of 
large eggs. This wholesale price is based on the price per dozen Grade 
A large egg price reported in the ``Weekly Combined Regional Shell 
Eggs'' report (WA--PY001) published by USDA's Poultry Market News and 
Analysis Branch.
    According to AEB, additional revenue is required in order to 
sustain and expand its programs. This proposed increase is consistent 
with sections 8 and 9 of the Act (7 U.S.C. 2701-2718) that permit AEB 
to recommend an increase in the assessment rate up to 20 cents per case 
and request that a referendum be held if such an increase is supported 
by a scientific study, marketing analysis, or other similar competent 
evidence.
    AEB conducted a marketing analysis the results of which support a 
5-cent increase in the assessment rate (to a total of 15 cents) to 
effectively strengthen AEB's programs. The marketing analysis addressed 
the need for a funding increase due to the following factors: (1) 
Inflation, including the overall increases in all costs associated with 
doing business since the last increase in AEB's assessment rate in 
1995; (2) AEB's advertising program, including the increased cost of 
advertising expenditures as well as new media outlets; (3) AEB's 
nutrition program, including additional research needed to examine both 
the nutritional benefits of eggs and the relationship between eggs and 
increased serum cholesterol levels and heart disease risk; and (4) 
AEB's food safety program, specifically expanding research to cover 
food safety as the public becomes more concerned about food safety 
issues.
    With the proposed increased assessment, the financial commitment of 
the U.S. egg industry for generic research and promotion activity could 
increase by 50 percent, from approximately $20 million to an estimated 
$30 million annually.
    AEB considered several alternatives, including keeping the current 
10 cents per 30-dozen case, an increase to 20 cents per 30-dozen case, 
and an increase to 15 cents per 30-dozen case. AEB ultimately concluded 
that not increasing the rate would not allow AEB even to sustain its 
programs effectively, and that an increase to 15 cents was sufficient 
to maintain and expand its promotion, research, and consumer 
information programs consistent with the purposes of the Act.
    This rule does not impose additional recordkeeping requirements on 
egg producers or collecting handlers. There are no Federal rules that 
duplicate, overlap, or conflict with this rule.
    In accordance with OMB regulation 5 CFR part 1320 which implements 
the Paperwork Reduction Act of 1995 [44 U.S.C. Chapter 35], the 
information collection and recordkeeping requirements that are imposed 
by the Order and Rules and Regulations have been approved previously 
under OMB control number 0581-0093. This rule does not result in a 
change to those information collection and recordkeeping requirements.
    We have performed this Initial Regulatory Flexibility Analysis 
regarding the impact of these proposed amendments to the Order and 
Rules and Regulations on small entities. We previously invited comments 
concerning potential effects of these amendments on small businesses 
(74 FR 48568). Comments on the Regulatory Flexibility Analysis are 
discussed below under Proposed Changes.

Background

    The Egg Research and Consumer Information Act (7 U.S.C. 2701-2718) 
(hereinafter referred to as the ``Act'') established a national egg 
research and promotion program--administered by AEB--that is financed 
through industry assessments and subject to oversight by AMS. This 
program of promotion, research, and consumer information is designed to 
strengthen the position of eggs in the marketplace and to establish, 
maintain, and expand markets for eggs.
    This program is financed by assessments on egg producers owning 
more than 75,000 laying hens. The Order specifies that handlers are 
responsible for collecting and remitting the producer assessments to 
AEB, reporting their handling of eggs, and maintaining records 
necessary to verify their reports.
    This rule proposes to increase the assessment rate on egg producers 
from 10 cents to 15 cents per case of commercial eggs. Only producers 
in the contiguous United States and the District of Columbia are 
subject to the program, and producers owning 75,000 or fewer laying 
hens are eligible to obtain an exemption from paying assessments.
    In order to sustain and expand the promotion, research, and 
consumer information programs at present levels, AEB believes that 
additional revenue is required. The proposed increase is estimated to 
generate $10 million in new revenue, depending upon production levels. 
Currently, AEB collects approximately $20 million per year. A 5-cent 
increase in the assessment rate is expected to increase the total to 
about $30 million per year.
    Section 8 of the Act provides for an assessment rate up to 20 cents 
per case. Section 1250.347 currently provides for an assessment at a 
rate not to exceed 10 cents per 30-dozen case of eggs, or equivalent 
thereof. Any increase from the current 10-cent rate established in the 
Order must be approved by egg producers voting in a referendum. Section 
9 of the Act provides that if AEB determines, based on a scientific 
study, marketing analysis, or other similar competent evidence, that an 
increase in the assessment rate is necessary to effectuate the declared 
policy of the Act, AEB may recommend the increase to the Secretary and 
request that a referendum be held to vote on the assessment increase.

Marketing Analysis and AEB Recommendation

    Consequently, AEB conducted a marketing analysis the results of 
which support a 5-cent increase in the assessment rate to a total of 15 
cents to effectively strengthen AEB's programs.
    Because of inflation, AEB estimates that an estimated $14.7 million 
would be required to duplicate the same media program in 2008 as was 
conducted for $7.9 million in 1995, when the assessment rate was last 
increased.
    Despite the success of the advertising program, AEB's media budget 
has not kept pace with media inflation. Over the last 10 years, the 
budget has remained relatively flat, averaging roughly $7.9 million 
annually. Meanwhile, the cost of media has steadily increased at the 
rate of 5 percent each year. If AEB's advertising budget matched 
inflation, it would be more than 50 percent larger today than it is, 
and it would reach $22 million in 2017. By not keeping up with 
inflation, each year AEB has been

[[Page 55294]]

reaching fewer consumers and less often.
    Ten years ago, AEB expanded its research to include studies on the 
nutritional benefits of eggs, including satiety and weight control; 
bioavailability of egg nutrients; egg protein and muscle retention in 
the elderly; egg lutein and eye health; egg choline and brain 
development, dietary choline requirements, and the relationship between 
choline and reduction of heart-disease risk; and eggs and school 
performance.
    The expansion of the research programs over the past decade has 
been an essential component of AEB's mission. To continue to fund the 
best and most relevant research projects, AEB needs to increase its 
level of research funding to account for the rising cost of studies 
today compared to 10 years ago, the increased number of research 
topics, and publicizing research findings.
    In addition to research into egg nutrients, AEB has also funded 
research and other programs related to food safety as the public's food 
security concerns have increased. AEB has funded research on 
Salmonella, avian influenza, transportation systems, cooking methods, 
and statistical analyses. Not only do these studies deal with current 
food safety issues, but they also help the egg industry prepare for and 
address potential risks.
    At the March 27, 2008, board meeting, AEB members voted unanimously 
to recommend that the assessment rate be increased from 10 cents to 15 
cents per 30-dozen case of commercial eggs.

Proposed Changes

    This rule would amend the Order as well as the implementing Rules 
and Regulations. Section 1250.347 of the Order states that the 
assessment rate is not to exceed 10 cents per 30-dozen case of eggs, 
provided that no more than such assessment shall be made on any case of 
eggs. Section 1250.514 provides for an assessment rate of 10 cents per 
case of commercial eggs handled for the account of each producer, with 
each case being subject to assessment only once. Accordingly, section 
1250.347 of the Order and section 1250.514 of the Rules and Regulations 
would be revised to reflect an assessment rate of 15 cents per case. In 
order to better reflect the provisions of the Act, section 1250.347 of 
the Order would be amended to reflect both the maximum assessment rate 
authorized under the Act as well as the assessment rate itself.
    A proposed rule to increase the assessment rate in the Order from 
10 cents to 15 cents per case was published in the Federal Register on 
September 25, 2009 (74 FR 48568). Comments were solicited from 
interested parties through November 24, 2009. Four comments were 
received: Two from egg producer companies opposing the increase, one 
from a State egg association, and one from a member of the public.
    One commenter, a large egg producer company, stated that AEB should 
be required to show the effectiveness of current programs before 
seeking to expand those programs. AEB employs a number of mechanisms to 
gauge the effectiveness of its programs, its producer members monitor 
those programs, and this information is communicated to the entire 
industry.
    The commenter also stated that only one sentence in the proposal 
was dedicated to the marketing analysis conducted by AEB. Further, the 
commenter stated that a new notice should be published to include 
additional details of how the analysis was conducted. We disagree. AMS 
provided a reasonable and appropriate discussion of the key points of 
the marketing analysis. The marketing analysis was conducted by AEB 
under the supervision of AEB's Executive Committee and is available 
from AEB. Further, AMS does not believe that a revised proposed rule is 
necessary or warranted. Additionally, any changes made as a result of 
amending the Order provision will not become effective unless favored 
by the egg industry in a referendum.
    The commenter further stated that the proposed rule failed to 
provide justification for what programs AEB conducts with its current 
budget. We disagree. AMS cited a number of AEB's current programs that 
are included in the summary of the marketing analysis. AEB informs the 
industry of its activities through a variety of producer 
communications, industry meetings, and other methods.
    The commenter also challenged the figures used in the Initial 
Regulatory Flexibility Analysis. AMS reviewed this issue and used a 
farm-gate price per dozen in the analysis contained herein.
    Additionally, the commenter stated that the rule did not contain an 
analysis of how the proposed increase affects the long-term profit 
margins of producers. The Initial Regulatory Flexibility Act analysis 
discussed and compared the equivalency of the current 10-cent 
assessment and the proposed 15-cent assessment on wholesale prices.
    The commenter also stated that the proposal gave no mention of how 
AEB currently budgets and spends assessment funds and that this must be 
addressed in a proposed rule so that the public can make an informed 
decision. We disagree. The discussion of the marketing analysis and 
AEB's recommendation in the proposed rule addresses this concern. 
Further, AEB regularly communicates with all egg producers about how 
funds are budgeted and expended.
    The same commenter stated that the proposed rule's mention of food 
safety as partial justification for the assessment increase was 
misleading because AEB no longer maintained a food safety function. We 
disagree. While certain food safety work, primarily with the Safe 
Quality Foods program, is not conducted by AEB, there are still food 
safety programs under AEB. These programs include food safety research, 
risk assessment research, consumer education, and work with foodservice 
institutions and culinary schools, among others.
    Finally, the commenter expressed opposition to a referendum and an 
increase in the assessment rate. We disagree. A referendum will be 
conducted in accordance with the provisions of the Act.
    A second commenter, an egg producer company, requested that the 
assessment increase be denied because food safety was moved to another 
industry organization and because of the financial burden on the 
industry. We disagree. As previously discussed, food safety programs 
currently are conducted by AEB. Further, the proposed rule took into 
account the impact of the assessment increase on the industry and 
discussed the need for additional revenue to sustain and expand its 
programs to the benefit of the industry.
    A third commenter, a member of the public, posed a number of 
questions that concerned the effectiveness of the program in relation 
to egg consumption, egg prices, program costs and benefits, and 
research studies produced. In addition, the commenter suggested an 
option for the increased assessment, stating that it should be 
appropriated back to the States or an option to select which committee 
can use the funds. This rule would increase the assessment rate from 10 
cents to 15 cents per 30-dozen case of commercial eggs. As previously 
discussed, AEB regularly communicates with all egg producers about how 
funds are budgeted and expended. Consistent with the Act, AEB conducted 
a marketing analysis the results of which support a 5-cent increase in 
the assessment rate to effectively strengthen AEB's programs. With 
regard to the commenter's suggested options, the AEB budget process 
would determine where such funds would be expended.

[[Page 55295]]

    A final comment was received from a State egg association. While 
the commenter declined to comment on whether the assessment should be 
increased, the commenter wrote in favor of AEB's programs. The 
commenter also suggested increasing support funding at the State level 
for promotion activities. As previously discussed, this would be up to 
producer members of the AEB to determine.
    In addition, the commenter suggested changes concerning board 
membership that are outside the scope of the proposed rule.
    The Act provides that AEB may recommend an increased assessment 
rate to the Secretary. In accordance with the provisions of the Act, 
AEB has done so, and the assessment increase provided for herein will 
be subject to a referendum vote.
    The proposed rule published on September 25, 2009, stated that 
producers owning 75,000 or fewer laying hens were exempt and ineligible 
to vote, as producers owning 75,000 or fewer laying hens are eligible 
to receive an exemption. However, Sec.  1250.530 of the regulations 
provide that, to obtain an exemption, producers must file an exemption 
statement with their collecting handler(s) and provide a copy to AEB. 
Producers who would qualify for an exemption but who are not certified 
for exemption and who pay assessments are not exempt and therefore 
eligible to vote in the referendum. The referendum order so states.

Referendum Order

    It is hereby directed that a referendum be conducted among eligible 
egg producers to determine whether such producers favor the assessment 
increase.
    The procedure applicable to the referendum shall be the procedure 
for the conduct of referenda in connection with the Egg Research and 
Promotion Order (7 CFR 1250.200) as published in this issue of the 
Federal Register. The referendum period shall be from October 29 
through November 19, 2010.
    For the purpose of determining voter eligibility, the 
representative period is the period January 1 through December 31, 
2009. Producers engaged in commercial egg production are eligible to 
vote in the referendum if they (a) owned more than 75,000 laying hens 
during that period, or (b) owned 75,000 or fewer laying hens, are not 
certified as exempt producers, and paid assessments.
    For the increase to be approved, it must be approved or favored by 
at least two-thirds of the producers voting in the referendum, or a 
majority of such producers if they represent at least two-thirds of the 
commercial eggs produced by those voting.
    The agents of the Secretary to conduct such referendum are hereby 
designated to be Angela C. Snyder and Sara D. Lutton, Research and 
Promotion; Standards, Promotion & Technology Branch; Poultry Programs, 
AMS, USDA; 1400 Independence Avenue, SW., Room 3932-S Stop 0256; 
Washington, DC 20250-20549; telephone (202) 720-4476; fax (202) 720-
2930, or e-mail at [email protected]. The agent may appoint 
subagents to assist in performing duties related to the referendum.
    Ballots, instructions, eligibility requirements, and other 
information pertinent to the referendum will be mailed to all known 
eligible egg producers.
    If any eligible voter does not receive a ballot by the beginning 
date of the referendum period, such individual may obtain a ballot from 
the address provided in the information contact section of this rule. 
Single copies of the complete text of the proposed amendments to the 
Egg Research and Promotion Order and Rules and Regulations may also be 
obtained from this address.

List of Subjects in 7 CFR Part 1250

    Administrative practice and procedure, Advertising, Agricultural 
research, Eggs and egg products, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble 7 CFR part 1250 is 
proposed to be amended as follows:

PART 1250--EGG RESEARCH AND PROMOTION

    1. The authority citation of 7 CFR part 1250 continues to read as 
follows:

    Authority:  7 U.S.C. 2701-2718 and 7 U.S.C. 7401.

    2. Section 1250.347 is revised to read as follows:

Sec.  1250.347  Assessments.

    Each handler designated in Sec.  1250.349 and pursuant to 
regulations issued by the Board shall collect from each producer, 
except for those producers specifically exempted in Sec.  1250.348, and 
shall pay to the Board at such times and in such manner as prescribed 
by regulations issued by the Board an assessment at a rate of 15 cents 
per 30-dozen case of eggs, or the equivalent thereof, for such expenses 
and expenditures, including provisions for a reasonable reserve and 
those administrative costs incurred by the Department of Agriculture 
after this subpart is effective, as the Secretary finds are reasonable 
and likely to be incurred by the Board and the Secretary under this 
subpart, except that no more than one such assessment shall be made on 
any case of eggs. The assessment rate shall not exceed 20 cents per 
case (or the equivalent of a case) of commercial eggs.
    3. In section 1250.514, the first sentence is revised to read as 
follows:

Sec.  1250.514  Levy of assessments.

    An assessment rate of 15 cents per case of commercial eggs is 
levied on each case of commercial eggs handled for the account of each 
producer. * * *

    Dated: September 3, 2010.
David R. Shipman,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2010-22643 Filed 9-9-10; 8:45 am]
BILLING CODE 3410-02-P
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