Source: https://www.federalregister.gov/documents/2014/05/06/2014-10132/marketing-order-regulating-the-handling-of-spearmint-oil-produced-in-the-far-west-revision-of
Timestamp: 2018-03-17 22:57:15
Document Index: 159200587

Matched Legal Cases: ['§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985']

Federal Register :: Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Revision of Administrative Rules and Regulations Governing Issuance of Additional Allotment Base
Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Revision of Administrative Rules and Regulations Governing Issuance of Additional Allotment Base
A Proposed Rule by the Agricultural Marketing Service on 05/06/2014
25710-25715 (6 pages)
AMS-FV-13-0088
https://www.federalregister.gov/d/2014-10132 https://www.federalregister.gov/d/2014-10132
Start Preamble Start Printed Page 25710
Interested persons are invited to submit written comments concerning this proposed rule. Comments must be sent to the Docket Clerk, Marketing Order and Agreement Division, Fruit and Vegetable Program, AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; Fax: (202) 720-8938; or Internet: http://www.regulations.gov. All comments should reference the document number and the date and page number of this issue of the Federal Register and will be made available for public inspection in the Office of the Docket Clerk during regular business hours, or can be viewed at: http://www.regulations.gov. All comments submitted in response to this proposal will be included in the record and will be made available to the public. Please be advised that the identity of the individuals or entities submitting the comments will be made public on the internet at the address provided above.
This proposal invites comments on revisions to the procedure currently prescribed for issuing additional allotment base for Class 1 (Scotch) and Class 3 (Native) spearmint oil to new and existing producers under the order's volume control provisions. This proposal would: (1) Reduce the number of allocations of additional allotment base issued to new producers each year from three to two, for each class of oil; (2) temporarily change the method by which additional allotment base is issued to existing producers in order to take into account producers whose total allotment base is below the size of the minimum economic enterprise (MEE) required to produce each class of spearmint oil; (3) provide that additional allotment base issued to existing producers under the revised procedure could not be used to replace allotment base that has been previously transferred away; and (4) provide that additional allotment base issued under the revised procedure could not be transferred to another producer for at least five years following issuance. This action was recommended unanimously by the Committee at a meeting on November 6, 2013.
Under the order, volume control measures are authorized to regulate the marketing of spearmint oil. Regulation is currently effectuated through the issuance of allotment bases to producers, the establishment of annual salable quantities and allotment percentages, and the reserve pooling of excess production. Allotment base is each producer's quantified share of the spearmint oil market based on a Start Printed Page 25711statistical representation of past spearmint oil production, with accommodation for reasonable and normal adjustments to such base. The order's provisions allow for the regulation of spearmint oil volume available to the market. The objective of regulation is to establish orderly marketing conditions for spearmint oil and to ensure that there is sufficient spearmint oil supply available to meet market requirements. Since the program's inception, volume regulation has been instrumental in promoting market and price stability within the industry.
The order contains provisions to ensure that there is orderly market expansion and that new producers are able to produce and market spearmint oil. Section 985.53(d)(1) of the order requires the Committee to annually make additional allotment bases available for each class of oil in the amount of no more than 1 percent of the total allotment base for that class of oil. Fifty percent of these additional allotment bases shall be made available to new producers and 50 percent made available to existing producers.
Section 985.53(d)(3) requires the Committee, with the approval of the Secretary, to establish rules and regulations to be used for determining the distribution of additional allotment bases. In 1982, these rules and regulations were established and have been subsequently revised on several occasions, most recently in 2003. Each time a revision is made, the Committee considers several important factors which include: the size of the MEE required for spearmint oil production, the applicant's ability to produce spearmint oil, the area where the spearmint oil will be produced, and other economic and marketing factors that have a direct impact on spearmint oil producers. The Committee reviews regularly, and updates as needed, the size of the MEE required for spearmint oil production. Under the order, MEE is the minimum size of production operation that the Committee has determined to be economically viable for each class of spearmint oil. Between 1982 and 1997, the Committee revised the MEE for Scotch spearmint oil production three times and Native spearmint oil production four times. As a result, the MEE increased from 1,200 pounds to 3,000 pounds for Scotch spearmint oil, and from 1,800 pounds to 3,400 pounds for Native spearmint oil.
Section 985.153(c)(1) of the order's administrative rules and regulations prescribes the method by which additional allotment base is issued to new producers. In addition, § 985.153(c)(2) prescribes the procedure by which additional allotment base is issued to existing producers. Lastly, § 985.153(d) specifies certain requirements for spearmint oil producers who are issued additional allotment base pursuant to § 985.153(c)(1) and (c)(2).
The Committee met on November 6, 2013, to consider the current procedures for issuing additional allotment base to new and existing producers and to make recommendations regarding the revision of those procedures. As required by § 985.153(c)(1)(ii), the Committee first considered the size of the MEE required to produce each class of spearmint oil. The Committee determined that the MEE levels for both classes of spearmint oil were no longer representative and needed to be revised. The Committee recognized that, as production and cultural practices for spearmint oil have continued to change and production costs per acre have increased, the Committee's previously established MEE levels are too low and should be revised. As such, the Committee concluded that the MEE thresholds had increased to 5,121 pounds for Scotch spearmint oil and 5,812 pounds for Native spearmint oil.
As a result of the Committee's determination that the MEE thresholds have increased, and given the quantity of additional allotment base available to new producers each year (1/2 of 1 percent of the total allotment base for each class of oil), the additional allotment base issued each year is only enough for two new producers, instead of three, for each class of oil.
The Committee's initial calculation is that the total allotment base for Scotch spearmint oil during the 2014-2015 marketing year will be approximately 2,089,146 pounds. One half of one percent of this amount would be 10,445 pounds. With the MEE for Scotch spearmint oil determined to be 5,121 pounds, issuing allotment base to two new producers would require 10,242 pounds, which is within the amount of additional allotment base that would be available for the year.
Likewise, the Committee's initial calculation is that the total allotment base for Native spearmint oil during the 2014-2015 marketing year will be approximately 2,371,350 pounds. One half of one percent of this amount would be 11,856 pounds. With the MEE for Native spearmint oil determined to be 5,812 pounds, issuing allotment base to two new producers would require 11,624 pounds, which is within the amount of additional allotment base that would be available for the year.
Based on the above information, the Committee unanimously recommended reducing the number of new producers that would be issued additional allotment base each year from three to two for each class of oil. The Committee also recommended that the additional allotment base issued to new producers not be transferrable for at least five years following issuance. The current retention period prior to transferability is two years. New producers issued additional allotment base under this proposal would continue to be required to submit evidence of an ability to produce and sell oil from such allotment base in the first marketing year following issuance of such base.
The Committee also gave consideration to existing producers with regards to the size of the MEE required to produce spearmint oil and the allocation of additional allotment base. After analyzing the Committee's records, the Committee found that some existing producers hold allotment bases that are below the revised MEE levels. As a result, the Committee unanimously recommended that the additional allotment base that is made available each year to existing producers be temporarily allocated first to those eligible producers who hold allotment bases that are less than the MEE threshold in order to bring their total up to that level.
Under the proposal, existing Scotch spearmint oil producers whose allotment bases are less than 5,121 pounds as of October 17, 2012, who apply and who have the ability to produce additional quantities of spearmint oil, would be issued sufficient additional allotment base to bring them up to the MEE threshold over a three-year period extending through the 2016-2017 marketing year. In addition, existing Native spearmint oil producers who hold allotment bases of less than 5,812 pounds as of October 17, 2012, who apply and who have the ability to produce additional quantities of spearmint oil, would be issued sufficient additional allotment base to bring them up to the MEE threshold over a four-year period extending through the 2017-2018 marketing year.
The Committee estimates there would be 21 producers of Scotch spearmint oil and 30 producers of Native spearmint oil eligible for additional allotment base under the proposal. It is expected that eligible existing producers of both Scotch and Native spearmint oil would apply for the full amount of additional allotment base made available to them. If there is any unallocated additional allotment base remaining for either Scotch spearmint oil during the 2016-Start Printed Page 257122017 marketing year, or Native spearmint oil during the 2017-2018 marketing year, such amount would be distributed on a prorated basis among all existing producers of each respective class of spearmint oil.
The Committee also recommended that additional allotment base issued to producers under the proposed revised procedure should not be used to replace allotment base that has been previously transferred away by that producer and that additional allotment base issued under the revised procedure not be transferrable for at least five years following issuance.
Since the establishment of the order, one of the Committee's primary objectives has been to help ensure that all spearmint oil producers are economically viable, as evidenced by holding allotment bases that are above the minimum economic threshold required for spearmint oil production. The Committee has worked to meet this objective by regularly determining the size of the MEE and issuing additional allotment base accordingly. Specifically, the Committee has raised the quantity of allotment base issued to new producers, and increased the allotment bases of those existing producers who hold allotment bases that are below the levels that comprise the minimum economic threshold required for spearmint oil production.
Another Committee objective has been to issue as many additional allotment bases as possible to new producers, at levels considered economically viable to each recipient. However, since the order limits the amount of additional allotment base issued to new producers, and because the size of the MEE required for spearmint oil production must be considered, the Committee has found it necessary to limit the number of new producers that are issued additional allotment base each year. Therefore, given the circumstances, the Committee believes the combination of these actions provides the best method available for optimizing the number of new producers that enter and remain in business, and also helps assure that there will continue to be a broad base of spearmint oil production.
The procedure for issuing additional allotment base to new and existing producers has been modified several times since the inception of the order. Between 1982 and 1991, the entire Far West spearmint oil production area was treated as a single region for the purpose of issuing additional allotment base to new producers. The Committee would determine the size and number of economic enterprises of additional allotment base for each class of spearmint oil to be made available to new producers. The additional allotment bases were then issued to new producers drawn from the lot of eligible individuals who had requested additional allotment base.
In 1991, the order's administrative rules and regulations were modified through the rulemaking process to divide the production area into four regions for purposes of issuing additional allotment base to new producers. An equal number of allotment bases were issued to new producers in each region based on the amount of additional allotment base available and the MEE determined by the Committee. Based on the Committee's determinations, this effectively allowed one new producer annually from each of the four regions to be issued additional allotment base, for each class of spearmint oil.
Again in 1997, rulemaking action was taken to reorganize and reduce the number of regions within the Far West production area from four to three. This revision had the effect of reducing the number of new producers that were issued additional allotment bases each year from four to three for each class of spearmint oil. The Committee recommended the revision with the purpose of distributing additional allotment bases within the production area, and to increase the size of allotment bases issued to new producers to correspond to the size of the MEE. The Committee had determined that the size of the MEE for spearmint oil production had increased to a point where there was insufficient additional allotment base to issue economically sufficient quantities of base to new producers in all four regions. By reorganizing and reducing the number of regions to three, there was adequate additional allotment base to issue base to three new producers of each class of spearmint oil. In reaching its recommendation, the Committee weighed the importance of issuing as many additional allotment bases as possible against the need to issue such bases at levels considered economically viable to each recipient.
In 2000, the three regions of the Far West production area were further reduced to two regions through the rulemaking process. However, the number of new producers issued additional allotment bases each year was maintained at three for each class of spearmint oil. As before, the Committee recommended the revision with the purpose of distributing additional allotment bases to new spearmint oil producers throughout the production area.
The proposal to reduce the number of new producers issued additional allotment base each year from three to two for each class of spearmint oil is consistent with previous rulemaking. The Committee's purpose, then and now, is to ensure that a maximum number of eligible new producers are issued additional allotment bases each year at levels that are economically viable to produce each class of spearmint oil.
Consistent with actions taken in the past, the Committee made the recommendation after carefully considering information available from its management records, Federal and state government sources, and industry participants. The Committee also considered the size of the MEE required for the production of each class of spearmint oil, historical statistics relating to the locations of the producers applying for the annual additional allotment base, and other factors, such as number of producers in the regulated production area and the amount of allotment base held by such producers. Based on its review, the Committee believes that the recommended action is the most effective option available in order to continue fulfilling the order's objectives.
There are eight spearmint oil handlers subject to regulation under the order. In addition, there are approximately 36 producers of Scotch spearmint oil and approximately 91 producers of Native spearmint oil in the regulated production area. Small agricultural service firms are defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts of less than $7,000,000, and small agricultural producers are defined as Start Printed Page 25713those having annual receipts of less than $750,000.
Based on the SBA's definition of small entities, the Committee estimates that two of the eight handlers regulated by the order could be considered small entities. Most of the handlers are large corporations involved in the manufacture and trade of essential oils and the products of essential oils in the international market. In addition, the Committee estimates that 19 of the 36 Scotch spearmint oil producers and 29 of the 91 Native spearmint oil producers could be classified as small entities under the SBA definition. Thus, many handlers and producers of Far West spearmint oil may not be classified as small entities.
Small spearmint oil producers generally are not as extensively diversified as larger ones and, as such, are more at risk from market fluctuations. Such small producers generally need to market their entire annual allotment and do not have the luxury of having other crops to cushion seasons with poor spearmint oil returns. Conversely, large diversified producers have the potential to endure one or more seasons of poor spearmint oil markets because income from alternate crops could support the operation for a period of time. Being reasonably assured of a stable market and price provides small producing entities with the ability to maintain sufficient cash flow and to meet annual expenses. Thus, the market and price stability provided by the order potentially benefit small producers more than such provisions benefit large producers.
This proposal would revise the procedure for issuing additional allotment base by reducing the number of additional allotment bases issued to new producers from three to two, for each class of spearmint oil. In addition, this action would increase the required retention period prior to transferability of additional allotment base issued to new producers from two years to five years following issuance.
This proposal would also temporarily change the procedures for the allocation of additional allotment base by class to take into account existing producers that are below the MEE threshold. This revision is intended to help existing small spearmint oil producers by increasing their individual allotment bases to a level that approximates the MEE required for spearmint oil production. The action would help ensure that small existing spearmint oil producers have sufficient allotment base to remain economically viable in the future. Also, this proposal would provide that additional allotment base issued to existing small producers could not be used to replace allotment base which has been previously transferred away. Finally, this action would provide that additional allotment base issued under the revised procedure could not be transferred for at least five years following issuance. The proposed procedure revising the method by which additional allotment base is allocated to existing producers would be in effect temporarily through May 31, 2017, for Scotch spearmint oil, and May 31, 2018, for Native spearmint oil, or until all producers who are eligible and apply have received enough allotment base to bring them up to the respective MEE level for each class of oil. Authority for this action is provided in § 985.53(d)(3) of the order.
At the meeting on November 6, 2013, the Committee discussed the impact of the proposed revisions on handlers and producers in terms of costs and returns. Under the order, the Committee is responsible for determining the size of the MEE required to produce each class of spearmint oil. The Committee determined the MEE size for the 2014-2015 and subsequent marketing years to be 5,121 pounds for Scotch spearmint oil and 5,812 pounds for Native spearmint oil. Taking this information into consideration, the Committee calculated that the number of new producers issued additional allotment bases each year would need to be reduced from three to two for each class of oil. While this action would reduce the number of new producers issued additional allotment bases each year, each new producer would have a larger initial allotment base, thereby enhancing their long term economic viability in the spearmint oil industry.
Additionally, the Committee estimates there are 21 producers of Scotch spearmint oil whose allotment bases are below the MEE threshold and it would take a total of 21,913 pounds of additional allotment base to raise these producers' allotment bases up to the Scotch spearmint oil MEE threshold. Likewise, the Committee estimates there are also 30 producers of Native spearmint oil whose allotment bases are below the MEE level, and it would take a total of 43,456 pounds of additional allotment base to raise these producers' allotment bases to the size of the MEE required to produce Native spearmint oil.
While the amount of additional allotment base necessary to bring all spearmint oil producers' allotment bases up to the MEE threshold is a fraction of the total allotment base, the benefits of the proposed revision would be significant to these small producers, because it would improve their economic viability into the future. Without the revision, small spearmint oil producers are at a greater risk of not being able to continue to produce spearmint oil. Therefore, the benefits of this proposed rule are expected to be greater for small producers than for larger entities.
The Committee discussed several alternatives to the recommendations contained in this proposed rule, including not making any changes to the procedures as currently prescribed in the order. However, the Committee determined that not taking the MEE threshold into consideration when issuing additional base would have negative impacts primarily affecting new and existing small producers. The Committee concluded that the most effective option was to revise the procedure for issuing additional allotment base in order to improve the economic viability of new and existing producers whose allotment bases are below the MEE threshold.
The Committee also considered alternative MEE thresholds before deciding on the levels that were most representative of the production economics for each class of spearmint oil. The Committee considers the size of the MEE for the production of each class of spearmint oil is accurate and appropriate given the information available.
In addition, the Committee considered the length of time that new and existing producers should be expected to hold onto additional allotment base issued under the proposed revised procedure before such allotment base could be transferred. The Committee considered other retention Start Printed Page 25714periods other than the proposed five years, including maintaining the current two year retention period. However, it concluded that a five year retention requirement prior to transfer of additional allotment base issued under the proposed revised procedure was a sufficient period for new and existing producers to demonstrate viability in spearmint oil production and should not present an undue hardship on the producers being issued the additional allotment base.
In its deliberations, the Committee considered all available information, including its determination of the size of the MEE required for spearmint oil production, historical statistics relating to the locations of the producers applying for the annual additional allotment base, and other factors such as the number of producers in the regulated production area and the amount of allotment base held by such producers. Based on those determinations, the full eight-member Committee unanimously recommended revising the procedure for issuing additional allotment base to new and existing spearmint oil producers, for each class of oil, as proposed herein.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the order's information collection requirements is currently approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0178, Generic Vegetable and Specialty Crops. Upon publication of the final rule, we will submit a Justification of Change to make minor modifications changing the appearance of two forms and adjusting the burden, accordingly.
In addition, the Committee meetings were widely publicized throughout the spearmint oil industry and all interested persons were invited to attend the meetings and participate in Committee deliberations on all issues. Like all Committee meetings, the March 6, 2013, and the November 6, 2013, meetings were public meetings and all entities, both large and small, were able to express views on this issue. Finally, interested persons are invited to submit comments on this proposed rule, including the regulatory and informational impacts of this action on small businesses.
A 15-day comment period is provided to allow interested persons to respond to this proposal. Fifteen days is deemed appropriate because: (1) The 2014-2015 fiscal period begins on June 1, 2014; (2) affected spearmint oil producers need to be informed as soon as possible of any changes in base allotment allocation in order to plan their plantings accordingly; and (3) spearmint oil producers are aware of this action, which was unanimously recommended by the Committee at a public meeting and is similar to previous actions recommended by the Committee and approved by the Secretary.
2. In § 985.153, redesignate and revise paragraphs (c)(1)(ii) as (c)(1)(iii) and (c)(2)(ii) as (c)(2)(iv), add new paragraphs (c)(1)(ii), (c)(2)(ii) and (c)(2)(iii), and revise paragraph (d) to read as follows:
(ii) The Committee shall review all requests from new producers for additional allotment base made available pursuant to § 985.53(d)(1).
(iii) Class 3 base. With respect to the issuance of additional Class 3 allotment base for existing producers for the 2014-2015 through the 2017-2018 marketing years, existing producers with less than Start Printed Page 257155,812 pounds of allotment base as of October 17, 2012, who request additional allotment base and who have the ability to produce additional quantities of Class 3 spearmint oil, shall be issued additional allotment base sufficient to bring them up to a level not to exceed 5,812 pounds: Provided, That such additional Class 3 allotment base shall be allocated to eligible producers on a pro-rata basis from available additional Class 3 allotment base: Provided further, That additional allotment base shall not be issued to any person if such additional allotment base would replace all or part of an allotment base that such person has previously transferred to another producer. Additional allotment base in excess of the amount needed to bring eligible producers up to 5,812 pounds of Class 3 allotment base shall be distributed on a prorated basis among all existing producers who apply and who have the ability to produce additional quantities of spearmint oil.
[FR Doc. 2014-10132 Filed 5-5-14; 8:45 am]