Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Increased Assessment Rate

Published date16 August 2019
Record Number2019-17618
SectionRules and Regulations
CourtAgricultural Marketing Service,Agriculture Department
Federal Register, Volume 84 Issue 159 (Friday, August 16, 2019)
[Federal Register Volume 84, Number 159 (Friday, August 16, 2019)]
                [Rules and Regulations]
                [Pages 41883-41885]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-17618]
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                Rules and Regulations
                 Federal Register
                ________________________________________________________________________
                This section of the FEDERAL REGISTER contains regulatory documents
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                Federal Register / Vol. 84, No. 159 / Friday, August 16, 2019 / Rules
                and Regulations
                [[Page 41883]]
                DEPARTMENT OF AGRICULTURE
                Agricultural Marketing Service
                7 CFR Part 985
                [Doc. No. AMS-SC-19-0026; SC19-985-2 FR]
                Marketing Order Regulating the Handling of Spearmint Oil Produced
                in the Far West; Increased Assessment Rate
                AGENCY: Agricultural Marketing Service, USDA.
                ACTION: Final rule.
                -----------------------------------------------------------------------
                SUMMARY: This rule implements a recommendation from the Far West
                Spearmint Oil Administrative Committee (Committee) to increase the
                assessment rate established for the 2019-2020 and subsequent marketing
                years. The assessment rate will remain in effect indefinitely unless
                modified, suspended, or terminated.
                DATES: Effective September 16, 2019.
                FOR FURTHER INFORMATION CONTACT: Barry Broadbent, Senior Marketing
                Specialist, or Gary Olson, Regional Director, Northwest Marketing Field
                Office, Marketing Order and Agreement Division, Specialty Crops
                Program, AMS, USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or
                Email: [email protected] or [email protected].
                 Small businesses may request information on complying with this
                regulation by contacting Richard Lower, Marketing Order and Agreement
                Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue
                SW, STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491,
                Fax: (202)720-8938, or Email: [email protected].
                SUPPLEMENTARY INFORMATION: This action, pursuant to 5 U.S.C. 553,
                amends regulations issued to carry out a marketing order as defined in
                7 CFR 900.2(j). This rule is issued under Marketing Order No. 985, as
                amended (7 CFR part 985), regulating the handling of spearmint oil
                produced in the Far West. Part 985 (referred to as the ``Order'') is
                effective under the Agricultural Marketing Agreement Act of 1937, as
                amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.'' The
                Committee locally administers the Order and is comprised of spearmint
                oil producers operating within the area of production, and a public
                member.
                 The Department of Agriculture (USDA) is issuing this rule in
                conformance with Executive Orders 13563 and 13175. This final rule
                falls within a category of regulatory actions that the Office of
                Management and Budget (OMB) exempted from Executive Order 12866 review.
                Additionally, because this rule does not meet the definition of a
                significant regulatory action, it does not trigger the requirements
                contained in Executive Order 13771. See OMB's Memorandum titled
                ``Interim Guidance Implementing Section 2 of the Executive Order of
                January 30, 2017, titled `Reducing Regulation and Controlling
                Regulatory Costs' '' (February 2, 2017).
                 This rule has been reviewed under Executive Order 12988, Civil
                Justice Reform. Under the Order now in effect, Far West spearmint oil
                handlers are subject to assessments. Funds to administer the Order are
                derived from such assessments. The assessment rate will be applicable
                to all assessable spearmint oil for the 2019-2020 marketing year, and
                continue until amended, suspended, or terminated.
                 The Act 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 a marketing order may file with USDA a
                petition stating that the order, any provision of the marketing order,
                or any obligation imposed in connection with the marketing order is not
                in accordance with law and request a modification of the marketing
                order or to be exempted therefrom. Such handler is afforded the
                opportunity for a hearing on the petition. After the hearing, USDA
                would rule on the petition. The Act provides that the district court of
                the United States in any district in which the handler is an
                inhabitant, or has his or her principal place of business, has
                jurisdiction to review USDA's ruling on the petition, provided an
                action is filed not later than 20 days after the date of the entry of
                the ruling.
                 The Order provides authority for the Committee, with the approval
                of USDA, to formulate an annual budget of expenses and collect
                assessments from handlers to administer the program. The members are
                familiar with the Committee's needs and with the costs of goods and
                services in their local area and can formulate an appropriate budget
                and assessment rate. The assessment rate is formulated and discussed in
                a public meeting where all directly affected persons have an
                opportunity to participate and provide input.
                 This final rule increases the assessment rate from $0.09 to $0.10
                per pound of Far West spearmint oil handled for the 2019-2020 and
                subsequent marketing years. The higher rate is necessary to cover most
                of the Committee's 2019-2020 marketing year budgeted expenditures. The
                Committee has had to draw from its monetary reserve to partially fund
                program activities during the last five marketing years and is expected
                to do so again for the 2019-2020 marketing year because of a one-time
                $45,000 expense to update the Committee's electronic recordkeeping
                system. However, the Committee believes that drawing from reserves to
                fund operations on an on-going basis is not a sustainable strategy
                moving forward. Increasing the continuing assessment rate will allow
                the Committee to better fund its 2019-2020 budgeted expenses and fully
                fund its budgeted expenses for the 2020-2021 and subsequent marketing
                years.
                 The Committee met on March 1, 2019, and unanimously recommended
                2019-2020 marketing year expenditures of $272,850 and an assessment
                rate of $0.10 per pound of spearmint oil handled. In comparison, last
                year's budgeted expenditures were $233,800. The assessment rate of
                $0.10 is $0.01 higher than the $0.09 rate currently in effect. The
                Committee recommended the assessment rate increase because expenditures
                have exceeded assessment revenue in the previous five marketing years
                and financial reserves have been reduced to approximately $180,000.
                Even with an assessment rate increase, monetary reserves are expected
                to be further reduced during the 2019-2020 marketing year to
                approximately
                [[Page 41884]]
                $130,000 but should stabilize at that level for the 2020-2021 and
                subsequent marketing years.
                 The major expenditures recommended by the Committee for the 2019-
                2020 marketing year include $169,000 for contracted administration by
                Ag Association Management, $45,000 for software/website maintenance,
                $30,850 for administrative expenses, $15,000 for Committee expenses,
                and $13,000 for market research and development projects. In
                comparison, major expenses for the 2018-2019 marketing year included
                $169,000 for contracted administration, $5,000 for software/website
                maintenance, $35,300 for administrative expenses, $17,500 for Committee
                expenses, and $12,000 for market research and development projects.
                 The assessment rate recommended by the Committee was derived by
                considering anticipated expenses, expected spearmint oil sales, and the
                amount of funds available in the authorized reserve. Income derived
                from handler assessments of $220,500 (2,205,000 million pounds of
                spearmint oil at $0.10 per pound), along with $1,650 in interest income
                and $50,700 from reserve funds, will be adequate to cover budgeted
                expenses of $272,850. Funds in the reserve (estimated to be $180,561 at
                the beginning of the 2019-2020 marketing year) will be kept within the
                maximum permitted by Sec. 927.42(a) and will not exceed the expenses
                of approximately one marketing year.
                 The assessment rate established in this rule will continue in
                effect indefinitely unless modified, suspended, or terminated by USDA
                upon recommendation and information submitted by the Committee or other
                available information.
                 Although this assessment rate will be in effect for an indefinite
                period, the Committee will continue to meet prior to or during each
                marketing year to recommend a budget of expenses and consider
                recommendations for modification of the assessment rate. The dates and
                times of Committee meetings are available from the Committee or USDA.
                Committee meetings are open to the public and interested persons may
                express their views at these meetings. USDA would evaluate Committee
                recommendations and other available information to determine whether
                modification of the assessment rate is needed. Further rulemaking would
                be undertaken as necessary. The Committee's budget for subsequent
                marketing years will be reviewed and, as appropriate, approved by USDA.
                Final Regulatory Flexibility Act
                 Pursuant to requirements set forth in the Regulatory Flexibility
                Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS)
                has considered the economic impact of this final rule on small
                entities. Accordingly, AMS has prepared this final regulatory
                flexibility analysis.
                 The purpose of the RFA is to fit regulatory actions to the scale of
                businesses subject to such actions in order that small businesses will
                not be unduly or disproportionately burdened. Marketing orders issued
                pursuant to the Act are unique in that they are brought about through
                group action of essentially small entities acting on their own behalf.
                 There are approximately 33 producers and 90 producers of Scotch and
                Native spearmint oil, respectively, in the regulated production area
                and approximately 8 spearmint oil handlers subject to regulation under
                the Order. Small agricultural service firms are defined by the Small
                Business Administration (SBA) as those having annual receipts of less
                than $7,500,000, and small agricultural producers are defined as those
                having annual receipts of less than $750,000 (13 CFR 121.201).
                 The Committee reported that recent producer prices for spearmint
                oil range from $15.50 to $18.00 per pound. The National Agricultural
                Statistics Service (NASS) reported that the 2017 U.S. season average
                spearmint oil producer price per pound was $16.20 (NASS has not
                released data for 2018). Multiplying $16.20 per pound by 2016-2017
                spearmint oil utilization of 2,186,751 million pounds yields a crop
                value estimate of about $35.4 million. Total 2016-2017 spearmint oil
                utilization, reported by the Committee, is 621,236 pounds and 1,565,515
                pounds for Scotch and Native spearmint oil, respectively.
                 Given the accounting requirements for the volume regulation
                provisions of the Order, the Committee maintains accurate records of
                each producer's production and sales. Using the $16.20 average
                spearmint oil price, and Committee production data for each producer,
                the Committee estimates that 11 of the 33 Scotch spearmint oil
                producers and 34 of the 90 Native spearmint oil producers could be
                classified as small entities under the SBA definition.
                 There is no third party or governmental entity that collects and
                reports spearmint oil prices received by spearmint oil handlers.
                However, the Committee estimates an average spearmint oil handling
                markup at approximately 20 percent of the price received by producers.
                Multiplying 1.20 by the 2016 producer price of $16.20 yields a handler
                f.o.b. price per pound estimate of $19.44.
                 Multiplying this handler f.o.b. price by spearmint oil utilization
                of 2,186,751 pounds results in an estimated handler-level spearmint oil
                value of $42.5 million. Dividing this figure by the number of handlers
                (8) yields estimated average annual handler receipts of about $5.3
                million, which is below the SBA threshold for small agricultural
                service firms.
                 Furthermore, using confidential data on pounds handled by each
                handler, and the abovementioned estimated handler price per pound, the
                Committee reported that it is likely that at least two of the eight
                handlers had 2017-2018 marketing year spearmint oil sales value that
                exceeded the SBA threshold.
                 Therefore, in view of the foregoing, the majority of producers of
                spearmint oil may be classified as large entities and the majority of
                handlers of spearmint oil may be classified as small entities.
                 This final rule increases the assessment rate collected from
                handlers for the 2019-2020 and subsequent marketing years from $0.09 to
                $0.10 per pound of spearmint oil handled. The Committee unanimously
                recommended 2019-2020 marketing year expenditures of $272,850 and a
                $0.10 per pound assessment rate. The $0.10 per pound assessment rate is
                $0.01 higher than the rate for the 2018-2019 marketing year.
                 The Committee estimates that the industry will handle 2,205,000
                pounds of spearmint oil during the 2019-2020 marketing year. Thus, the
                $0.10 per pound rate should provide $220,500 in assessment income.
                Income derived from handler assessments, and $1,650 of interest income,
                will be adequate to cover most of the budgeted expenses. Given the
                budgeted one-time $45,000 expense to upgrade the Committee's electronic
                recordkeeping system, the Committee anticipates needing to draw $50,700
                from its monetary reserve in the 2019-2020 marketing year to fully fund
                all its budgeted expenses. However, the Committee expects that
                assessment revenue will completely cover budgeted expenses for the
                2020-2021 and subsequent marketing years.
                 The major expenditures recommended by the Committee for the 2019-
                2020 marketing year include $169,000 for contracted administration by
                Ag Association Management, $45,000 for software/website maintenance,
                $30,850 for administrative expenses, $15,000 for Committee expenses,
                and $13,000 for market research and
                [[Page 41885]]
                development projects. Budgeted expenses for these items in the 2018-
                2019 marketing year were $169,000, $5,000, $35,300, $17,500, and
                $12,000, respectively.
                 The higher assessment rate is necessary to cover most of the
                Committee's 2019-2020 marketing year budgeted expenditures. The
                Committee has had to draw from its monetary reserve to partially fund
                program activities during the previous five marketing years and expects
                to draw $50,700 from the reserve in the 2019-2020 marketing year to
                fund a one-time $45,000 upgrade to its electronic recordkeeping system.
                However, the Committee believes that drawing from its financial reserve
                to fund operations on an on-going basis is not a sustainable strategy.
                Increasing the continuing assessment rate will allow the Committee to
                fully fund budgeted expenses, and replenish its financial reserve,
                beginning in the 2020-2021 marketing year.
                 Prior to arriving at this budget and assessment rate, the Committee
                considered maintaining the current assessment rate of $0.09 per pound.
                However, leaving the assessment rate unchanged would not have generated
                enough revenue to meet the Committee's 2019-2020 marketing year
                budgeted expenses and would have required the Committee to deplete its
                financial reserve to a fiscally dangerous level. Based on estimated
                shipments, the recommended assessment rate of $0.10 per pound of
                spearmint oil should provide $220,500 in assessment income. The
                Committee determined assessment revenue will be adequate to cover most
                of the budgeted expenditures for the 2019-2020 marketing year and all
                of the Committee's budgeted expenditures for the 2020-2021 and
                subsequent marketing years. Moving forward, any excess funds will be
                used to replenish the Committee's monetary reserve. Reserve funds will
                be kept within the amount authorized in the Order.
                 A review of historical data and preliminary information pertaining
                to the upcoming marketing year indicates that the average producer
                price for the 2019-2020 season should be approximately $15.50-18.00 per
                pound of spearmint oil. Therefore, the estimated assessment revenue for
                the 2019-2020 marketing year as a percentage of total producer revenue
                will be between 0.55 and 0.65 percent.
                 This action increases the assessment obligation imposed on
                handlers. While assessments impose some additional costs on handlers,
                the costs are minimal and distributed uniformly across all spearmint
                oil handlers. Some of the additional costs may be passed on to
                producers. However, these costs would be offset by the benefits derived
                by the operation of the Order.
                 The Committee's meetings were widely publicized throughout the Far
                West Spearmint Oil industry. All interested persons were invited to
                attend the meetings and participate in Committee deliberations on all
                issues. Like all Committee meetings, the March 1, 2019, meeting was a
                public meeting and all entities, both large and small, were able to
                express views on this issue. Interested persons were invited to submit
                comments on this rule, including the regulatory and information
                collection impacts of this action on small businesses.
                 In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
                chapter 35), the Order's information collection requirements have been
                previously approved by the OMB and assigned OMB No. 0581-0178,
                Specialty Crops. No changes in those requirements will be necessary
                because of this action. Should any changes become necessary, they will
                be submitted to OMB for approval.
                 This final rule will not impose any additional reporting or
                recordkeeping requirements on either small or large Far West spearmint
                oil handlers. As with all Federal marketing order programs, reports and
                forms are periodically reviewed to reduce information requirements and
                duplication by industry and public sector agencies. As noted in the
                initial regulatory flexibility analysis, USDA has not identified any
                relevant Federal rules that duplicate, overlap, or conflict with this
                final rule.
                 AMS is committed to complying with the E-Government 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 proposed rule concerning this action was published in the Federal
                Register on May 30, 2019 (84 FR 25010). Copies of the proposed rule
                were provided to all Far West spearmint oil handlers. The proposal was
                also made available through the internet by USDA and the Office of the
                Federal Register. A 30-day comment period ending July 1, 2019, was
                provided for interested persons to respond to the proposal. One comment
                in support of the action was received. Accordingly, no changes will be
                made to the rule as proposed.
                 A small business guide on complying with fruit, vegetable, and
                specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions
                about the compliance guide should be sent to Richard Lower at the
                previously mentioned address in the FOR FURTHER INFORMATION CONTACT
                section.
                 After consideration of all relevant material presented, including
                the information and recommendation submitted by the Committee and other
                available information, it is hereby found that this rule will tend to
                effectuate the declared policy of the Act.
                List of Subjects in 7 CFR Part 985
                 Marketing agreements, Oils and fats, Reporting and recordkeeping
                requirements, Spearmint oil.
                 For the reasons set forth in the preamble, 7 CFR part 985 is
                amended as follows:
                PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL
                PRODUCED IN THE FAR WEST
                 Authority: 7 U.S.C. 601-674.
                0
                2. Revise 985.141 to read as follows:
                Sec. 985.141 Assessment rate.
                 On and after June 1, 2019, an assessment rate of $0.10 per pound is
                established for Far West spearmint oil. Unexpended funds may be carried
                over as a reserve.
                 Dated: August 13, 2019.
                Bruce Summers,
                Administrator, Agricultural Marketing Service.
                [FR Doc. 2019-17618 Filed 8-15-19; 8:45 am]
                BILLING CODE 3410-02-P
                

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