Watermelon Research and Promotion Plan; Increased Assessment Rate
| Published date | 09 July 2024 |
| Citation | 89 FR 56234 |
| Pages | 56234-56237 |
| FR Document | 2024-14937 |
| Section | Proposed rules |
| Issuer | Agricultural Marketing Service,Agriculture Department |
Federal Register, Volume 89 Issue 131 (Tuesday, July 9, 2024)
[Federal Register Volume 89, Number 131 (Tuesday, July 9, 2024)]
[Proposed Rules]
[Pages 56234-56237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14937]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
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.
========================================================================
Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 /
Proposed Rules
[[Page 56234]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 1210
[Doc. No. AMS-SC-24-0020]
Watermelon Research and Promotion Plan; Increased Assessment Rate
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rulemaking would implement a recommendation from
the National Watermelon Promotion Board to increase the assessment rate
from six cents per hundredweight to nine cents per hundredweight.
Domestic watermelon producers of 10 acres or more and domestic first
handlers of watermelons would each pay four and a half cents per
hundredweight, and importers of 150,000 pounds or more annually of
watermelons would pay nine cents per hundredweight. This proposed
rulemaking would also amend current regulatory language to correct non-
substantive and typographical errors.
DATES: Comments must be received by August 8, 2024.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposed rulemaking. Comments may be mailed to the
Docket Clerk, Market Development Division, Specialty Crops Program,
Agricultural Marketing Service, U.S. Department of Agriculture, 1400
Independence Avenue SW, Room 1406-S, STOP 0244, Washington, DC 20250-
0237; submitted by Email: SM.USDA.MRP.AMS .[email protected]; or via
internet at https://www.regulations.gov. Comments should reference the
document number and the date and page number of this issue of the
Federal Register. Comments submitted in response to this proposed
rulemaking will be included in the record and will be made available to
the public and can be viewed at: https://www.regulations.gov. 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.
FOR FURTHER INFORMATION CONTACT: William Hodges, Marketing Specialist,
Market Development Division, Specialty Crops Program, AMS, USDA, 1400
Independence Avenue SW, Room 1406-S, STOP 0244, Washington, DC 20250-
0244; Telephone: (443) 571-8456; or Email: [email protected].
SUPPLEMENTARY INFORMATION: This proposed rulemaking affecting the
Watermelon Research and Promotion Plan (7 CFR part 1210) (Plan) is
authorized by the Watermelon Research and Promotion Act (7 U.S.C. 4901-
4916) (Act).
Executive Orders 12866, 13563 and 14094
The Agricultural Marketing Service (AMS) is issuing this proposed
rulemaking in conformance with Executive Orders 12866, 13563, and
14094. Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
Executive Order 14094 reaffirms, supplements, and updates Executive
Order 12866 and further directs agencies to solicit and consider input
from a wide range of affected and interested parties through a variety
of means. This proposed rulemaking is not a significant regulatory
action within the meaning of Executive Order 12866. Accordingly, this
action has not been reviewed by the Office of Management and Budget
under sec. 6 of the Executive order.
Executive Order 13175
This proposed action has been reviewed in accordance with the
requirements of Executive Order 13175, Consultation and Coordination
with Indian Tribal Governments, which requires agencies to consider
whether their rulemaking actions would have Tribal implications. AMS
has determined that this proposed rulemaking is unlikely to have
substantial direct effects on one or more Indian Tribes, or the
relationship between the Federal Government and Indian Tribes, or on
the distribution of power and responsibilities between the Federal
Government and Indian Tribes.
Executive Order 12988
This proposal has been reviewed under Executive Order 12988, Civil
Justice Reform. It is not intended to have retroactive effect. The Act
provides that it shall not affect or preempt any other Federal or State
law authorizing promotion or research relating to an agricultural
commodity.
Under sec. 1650 of the Act (7 U.S.C. 4909), a person may file a
written petition with the Secretary of Agriculture (Secretary) if they
believe that the Plan, any provision of the Plan, or any obligation
imposed in connection with the Plan, is not in accordance with the law.
In any petition, the person may request a modification of the Plan or
an exemption from the Plan. 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.
Background
Under the Plan, the National Watermelon Promotion Board (Board)
administers a nationally coordinated program of research, development,
advertising, and promotion designed to strengthen the position of
watermelons in the marketplace, and to establish, maintain, and expand
markets for watermelons. To administer the program, Sec. Sec. 1210.328
and 1210.341 of the Plan authorize the Board, with the approval of AMS,
to formulate an annual budget of expenses and collect assessments on
domestic producers growing 10 acres or more of watermelons, domestic
first handlers of watermelons, and importers of 150,000 or more pounds
of watermelons per year. The Board is familiar with both the
[[Page 56235]]
program's needs and the rising costs of research and promotion
initiatives and are able to formulate an appropriate budget and
assessment rate.
Currently, in accordance with the Plan, domestic watermelon
producers of 10 acres or more and domestic first handlers of
watermelons each pay three cents per hundredweight, and importers of
150,000 pounds or more annually of watermelons pay six cents per
hundredweight. The Plan specifies that handlers are responsible for
collecting and submitting both the producer and handler assessments to
the Board, reporting their handling of watermelons, and maintaining
records necessary to verify their reporting(s). Importers are
responsible for payment of assessments to the Board on watermelons
imported into the United States through the U.S. Customs Service and
Border Protection. The current assessment rate for watermelon
producers, handlers, and importers was established in 2008.
The Board recommended increasing the current assessment rate to
address inflation's impact on buying power while maintaining its
competitiveness in the marketplace.
Board Recommendation To Adjust the Assessment Rate
This proposed rulemaking would amend Sec. 1210.515 of the Plan by
increasing the assessment rate from six cents per hundredweight to nine
cents per hundredweight. The assessment on domestic watermelon
producers of 10 acres or more and domestic first handlers of
watermelons would increase from three cents per hundredweight to four
and a half cents per hundredweight, and the assessment on importers of
150,000 pounds or more annually of watermelons would increase from six
cents per hundredweight to nine cents per hundredweight.
The Board discussed this recommendation over several months at
various State and regional watermelon association meetings in addition
to presenting at a public town hall meeting on February 23, 2024, at
the National Watermelon Association's (NWA) annual convention. The
Board sent out postcards to all industry contacts in their database to
invite them to the NWA town hall meeting and provide information on the
proposed assessment increase. The Board met on February 24, 2024, and
voted unanimously to propose the assessment increase from six cents to
nine cents per hundredweight of watermelons. Board members present for
the vote represented domestic producers and first handlers, as well as
importers.
From 2008 to 2023, according to the Board, the United States
experienced inflation of 43.7%, which equates to 2.3% when compounded
annually. This dollar devaluation translates to a loss in buying power
of roughly 30% since the previous assessment increase was instituted in
2008. The erosion of buying power and continued inflationary pressure
on funds limit the Board's research and promotion activities. The
proposed change would further support the Board's goal of a balanced
budget beginning in 2025, while still allowing for increased research
and promotion of watermelon across the Board's communication,
marketing, foodservice, and research committees.
Section 1210.341 of the Plan states, in part, that in the case of
an importer, the assessment shall be equal to the combined rate for
domestic producers and handlers and shall be paid by the importer at
the time of entry of the watermelons into the United States.
Accordingly, with the proposed increased assessment rate of nine cents
per hundredweight, domestic watermelon producers of 10 acres or more
and domestic first handlers of watermelons would each pay four and a
half cents per hundredweight, and importers of 150,000 pounds or more
annually of watermelons would pay nine cents per hundredweight. This
proposed increase is consistent with sec. 1647(f) of the Act that
permits changes in the assessment rate through notice and comment
procedures. Section 1210.341(b) of the Plan states that assessment
rates shall be fixed by the Secretary in accordance with sec. 1647(f)
of the Act. Further, not more than one assessment on a producer,
handler, or importer may be collected on any lot of watermelons.
Accordingly, if this proposed rulemaking was finalized, Sec.
1210.515(a) of the Plan would be revised to reflect the recommendation
of the Board as it relates to assessments.
Amend Current Regulatory Language
This proposed rulemaking also includes proposed changes to Sec.
1210.515(b) of the Plan to amend language and make non-substantive
corrections to the text. These proposed edits are administrative
changes and would not have an impact on the assessment rate. The
proposed edits would: amend the misspelling of ``scheudle'' to
``schedule''; amend ``U.S. Customs Service (USCS)'' to ``U.S. Customs
Service and Border Protection (Customs)''; amend ``USCS'' to
``Customs'' and amend ``of any other'' to ``or any other''. The
proposal would also add clarifying language and amend ``may submit the
Board'' to ``may submit to the Board''.
Initial Regulatory Flexibility Act and Paperwork Reduction Act
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) [5 U.S.C. 601 et seq.], AMS has considered the economic
impact of this action on the small producers, handlers, and importers
that would be affected by this proposed rulemaking. 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.
Domestic producers of less than 10 acres of watermelons are exempt
from this program. Importers of less than 150,000 pounds of watermelons
per year are also exempt. According to the Board, there are
approximately 429 producers, 121 first handlers, and 183 importers who
are subject to the provisions of the Plan.
The Small Business Administration (SBA) defines, in 13 CFR part
121, small agricultural producers of watermelons as those having annual
receipts equal to or less than $3.75 million [NAICS code 111219--Other
Vegetable (except Potato) and Melon Farming] and small agricultural
service firms (handlers and importers) as those having annual receipts
equal to or less than $34.0 million [NAICS code -111514--Postharvest
Crop Activities (except Cotton Ginning)]. Under these definitions, the
majority of the producers, handlers, and importers that would be
affected by this proposed rulemaking would be considered small
entities. This conclusion is based on following computations and data,
using the current Board assessment rate of six cents per hundredweight.
For 2023, National Agricultural Statistics Service (NASS) reported
a season average producer price per pound of $0.214. The Board
estimated the Freight on Board (FOB) price to be $0.284 for both
importers and handlers in 2023. The Board reported that 2023
assessments received from domestic entities totaled $2.247 million,
with equal proportions of $1.1235 million coming from producers and
handlers. Dividing $1.1235 million by half of the current assessment
rate of $0.06 per hundredweight, as producers and handlers evenly split
the assessment, yields an estimate of total producer pounds assessed of
3,745.0 million ($1.1235 million divided by $0.0003 per pound).
Dividing the total pounds assessed quantity by 429 producers yields an
average assessed pounds per producer estimate of 8.73 million.
[[Page 56236]]
Multiplying the annual assessed pounds per producer estimate of 8.73
million pounds by the 2023 NASS season average producer price per pound
of $0.214 yields an average annual watermelon sales receipts per
producer estimate of $1.87 million. This is well below the SBA small
producer size threshold of $3.75 million.
With an equal proportion of annual domestic assessments coming from
handlers, the total handler pounds assessed is also 3,745.0 million.
Dividing total handler pounds assessed by 121 handlers yields an
average assessed pounds per handler estimate of 30.95 million pounds.
Multiplying this estimate of annual assessed pounds per handler of
30.95 million pounds by the season average handler price per pound of
$0.284, provided by the Board, yields an estimate of average annual
watermelon sales receipts per handler of $8.79 million. This is well
below the SBA small handler size threshold of $34.0 million.
The Board reported that assessments received from importers totaled
$1.196 million in 2023. Dividing $1.196 million by the current
assessment rate of $0.06 per hundredweight ($0.0006 per pound) yields
an estimate of total importer pounds assessed of 1,993.3 million.
Dividing the total pounds assessed by the number of importers, 183,
yields an average assessed pounds per importer estimate of 10.89
million. Multiplying this estimate of annual assessed pounds per
importer of 10.89 million pound by the season average importer price
per pound of $0.284 yields an estimate of average annual watermelon
sales receipts per importer of $3.09 million. This is well below the
SBA small importer size threshold of $34.0 million. Assuming normal
distributions, the majority of producers, handlers, and importers would
be classified as small businesses according to SBA size standards.
Under the current Plan, domestic watermelon producers of 10 acres
or more and domestic first handlers of watermelon each pay a mandatory
assessment rate of three cents per hundredweight, and importers of more
than 150,000 pounds or more annually of watermelons pay an assessment
of six cents per hundredweight. Assessments under the program are used
by the Board to finance promotion, research, and educational programs
designed to increase consumer demand for watermelons in the United
States and international markets. The six cents per hundredweight
assessment rate on watermelons became effective when the Plan was
amended in January 2008, which was the only time that the Board
increased the assessment rate since the inception of the program in
1989. The Plan is administered by the Board under the U.S. Department
of Agriculture (USDA) supervision.
According to the Board, additional revenue is required to sustain
and expand the promotional, research, and communications programs. The
Board approved the proposed assessment rate increase at its February
24, 2024, meeting. This proposed increase is consistent with sec.
1647(f) of the Act that permits changes in the assessment rate through
notice and comment procedures. Section 1210.341(b) of the Plan states
that assessment rates shall be fixed by the Secretary in accordance
with sec. 1647(f) of the Act. Section 1210.515(a) of the Plan currently
states that an assessment of three cents per hundredweight shall be
levied on all watermelons produced, and on all watermelons first
handled for consumption as human food. It also states that an
assessment of six cents per hundredweight shall be levied on
watermelons imported into the United States for consumption as human
food. Further, not more than one assessment on a producer, handler, or
importer may be collected on any lot of watermelons. Under this
proposal, Sec. 1210.515(a) of the Plan would be revised to increase
the assessment rate from six cents to nine cents per hundredweight. The
proposal would increase the assessment rate of three cents per
hundredweight to four and a half cents per hundredweight to be levied
on all watermelons produced, and on all watermelons first handled for
consumption as human food in the United States and increase the
assessment rate from six cents to nine cents per hundredweight to be
levied on all watermelons imported into the United States for ultimate
consumption as human food.
The Board contracted with an independent industry analyst to
conduct an inflation impact analysis using the Consumer Price Index
(CPI) published by the U.S. Bureau of Labor Statistics. The base year
for the analysis was 2008, the year of the last assessment rate
increase, and the analysis extended through April 2023. The CPI was
211.080 in January 2008 and 303.363 in April 2023. Dividing 303.363 by
211.080 yields a ratio of 1.437, or an increase of 43.7 percent. This
inflation rate equates to 2.3% when compounded annually. Dividing the
Board's average annual revenue throughout this period of $3,024,721 by
the CPI change ratio of 1.437 yields a figure of $2,104,601. This
decline of $920,120 shows the budget's reduced buying power of roughly
30 percent since the previous assessment increase. This reduction in
buying power due to inflation has had a significant impact on the
industry's ability to compete for market share. The cost of media
services, research programs, promotional opportunities, as well as
general administrative costs and fees paid to USDA have continually
risen. USDA's AMS oversight costs were budgeted at $105,000 in 2008,
compared to $147,000 for 2023. It is AMS policy that all research and
promotion programs be charged in a fair and equitable manner.
Assessments collected have not kept pace with these increasing costs.
Movement and sales of watermelon continue to grow, however, that growth
has not outpaced the negative effects of inflation.
Armada Corporate Intelligence conducted a five-year return on
investment (ROI) study for the Board from 2017-2021, to determine the
impact of Board activities on the demand for watermelons. The resultant
ROI for the Board's promotional endeavors is approximately 19:1, which
displays that the activities of the Board have a significant positive
impact on the watermelon industry. For further details, the study is
located at https://www.watermelon.org/press-releases/watermelon-board-announces-significant-positive-impact-for-watermelon-industry-with-191-roi/. Armada Corporate Intelligence's 2021 econometric analysis is
aligned with prior economic studies developed for the Board, including
Dr. Harry Kaiser of Cornell University's 2017 analysis.\1\
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\1\ https://www.watermelon.org/wp-content/uploads/2020/01/Econometric-Evaluation.pdf.
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With the proposed increase assessment, the financial commitment of
the US watermelon industry for research and promotion activity would
increase approximately 50% in current dollars. For example, if we apply
the proposed assessment increase to 2023, in which collections totaled
$3,442,105, the increase in assessments collected would have been
approximately $1,721,053. The Board plans to use the additional funds
to expand promotion and research activities, maintain operating
reserves, and to address inflation's impact on buying power.
The Board estimates the proposed nine cents per hundredweight
adjustment to the assessment rate would increase the cost to watermelon
producers and handlers from $12 per truckload of watermelons to $18 per
truckload of watermelons each. Similarly, the adjusted assessment rate
will increase the cost to watermelon importers from $24 a truckload to
$36 a truckload. This is based on a 40,000-
[[Page 56237]]
pound net weight of watermelons per truckload.
Prior to its recommendation to increase the assessment rate, the
Board considered three alternative options. First, the Board considered
maintaining the current assessment rate of six cents per hundredweight.
However, with no increase to the assessment rate, the Board determined
many research and promotion programs would be reduced or eliminated to
balance the budget. Consequently, the alternative of maintaining the
current assessment rate was rejected.
The second alternative considered by the Board was a two-cent
increase to the assessment rate, raising the assessment rate from six
cents per hundredweight to eight cents per hundredweight. This would
allow the Board to operate with a balanced budget beginning in 2025, in
addition to increasing investment in Board promotions. However, the
Board decided against supporting a two-cent increase as inflationary
pressure may further limit operations of the Board in coming years.
The third alternative considered by the Board was a tiered increase
of the assessment rate with a two-cent increase effective on January 1,
2025, for a rate of eight cents per hundredweight, and an additional
one-cent increase effective on January 1, 2026, for a rate of nine
cents per hundredweight. This option to spread the assessment increase
over a prolonged period was considered, but the Board ultimately
decided against this alternative to avoid confusion with concurrent
annual assessment adjustments.
This proposed rulemaking would also include administrative changes
to Sec. 1210.515(b) of the Plan to correct non-substantive and
typographical errors. These administrative changes would have no impact
on the assessment rate.
This proposed rulemaking would not impose additional recordkeeping
requirements on first handlers, producers, or importers of watermelons.
Producers of fewer than 10 acres of watermelon and importers of less
than 150,000 pounds of watermelon annually are exempt. There are no
Federal rules that duplicate, overlap, or conflict with this proposed
rulemaking. In accordance with the Office of Management and Budget
(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 Plan
have been approved previously under OMB control number 0581-0093. This
proposed rulemaking would not result in a change to the information
collection and recordkeeping requirements previously approved.
AMS performed this initial Regulatory Flexibility Analysis
regarding the impact of this proposed amendment to the Plan on small
entities, and we invite comments concerning potential effects of this
amendment on small businesses.
AMS has determined this proposed rulemaking is consistent with the
Act and would effectuate its purposes.
A 30-day comment period is provided to allow interested persons to
respond to this proposal. All written comments received in response to
this proposed rulemaking by the date specified will be considered prior
to finalizing this action.
List of Subjects in 7 CFR Part 1210
Administrative practice and procedure, Advertising, Agricultural
research, Consumer information, Marketing agreements, Reporting and
recordkeeping requirements, Watermelons.
For the reasons set forth in the preamble, the Agricultural
Marketing Service proposes to amend 7 CFR part 1210 as follows:
PART 1210--WATERMELON RESEARCH AND PROMOTION PLAN
0
1. The authority citation for part 1210 continues to read as follows:
Authority: 7 U.S.C. 4901-4916 and 7 U.S.C. 7401.
0
2. Amend Sec. 1210.515 by revising paragraphs (a) and (b) to read as
follows:
Sec. 1210.515 Levy of assessments.
(a) An assessment of four and a half cents per hundredweight shall
be levied on all watermelons produced for ultimate consumption as human
food, and an assessment of four and a half cents per hundredweight
shall be levied on all watermelons first handled for ultimate
consumption as human food. An assessment of nine cents per
hundredweight shall be levied on all watermelons imported into the
United States for ultimate consumption as human food at the time of
entry in the United States.
(b) The import assessment shall be uniformly applied to imported
watermelons that are identified by the numbers 0807.11.30 and
0807.11.40 in the Harmonized Tariff Schedule of the United States or
any other number used to identify fresh watermelons for consumption as
human food. The U.S. Customs Service and Border Protection (Customs)
will collect assessments on such watermelons at the time of entry and
will forward such assessment as per the agreement between Customs and
USDA. Any importer or agent who is exempt from payment of assessments
may submit to the Board adequate proof of the volume handled by such
importer for the exemption to be granted.
* * * * *
Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2024-14937 Filed 7-8-24; 8:45 am]
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